Bangladesh, like many less-developed countries, entered the industrial economy by producing finished goods through the assembly of imported components. Low-cost labour and minimal requirements for capital-intensive machinery-often referred to as "screwdriver technology"-enabled local producers to attach the "Made in Bangladesh" label to high-tech products such as mobile phones, laptop computers, and television sets.
However, this opportunity is gradually diminishing due to the declining need for labour in the assembly stage of production. For instance, Apple reportedly spends only about $1.5 on direct labour for assembling a device, while paying approximately $485 to component suppliers for manufacturing parts for a 256GB iPhone 16 Pro Max.
This disparity may create a temptation to pursue backward linkages in order to increase local value addition through component manufacturing. Yet, the negligible role of labour in component production, the high cost of capital-intensive machinery, and the near-monopolistic structure of global supply chains raise serious questions about the economic feasibility of such a transition.
A closer dissection of mobile phone handsets offers further insight. The major cost components of smartphones include the system-on-chip (SoC), modem, display panel, rear camera, casing, storage, and battery. Manufacturing each of these components requires access to a wide array of licensed patents and the deployment of highly expensive capital-intensive machinery. For example, establishing a memory fabrication facility can require investments exceeding $10 billion. Moreover, the effective economic lifespan of such plants is only a few years, necessitating continuous reinvestment and upgrades. As a result, achieving large-scale production is critical for viability.
This dynamic has led to a highly concentrated global memory chip market, now dominated by just three producers: Micron Technology, SK Hynix, and Samsung Electronics. Over time, increasing scale and specialisation have driven consolidation, reducing the number of producers from around 20 in the 1990s to only a handful today.
A similar pattern of concentration prevails across other key components, from modems to storage, reflecting the structural barriers to entry and the dominance of a few global players.
One possible argument is to attract major global players through foreign direct investment (FDI) or joint ventures. However, as the need for labour declines and scale requirements for capital investment rise, neither access to a domestic market nor the availability of low-cost labour remains economically compelling. Consequently, a fierce global subsidy race has emerged for alluring FDI to enter high-tech component manufacturing. For example, India's large domestic market alone was insufficient to attract Micron Technology to establish a memory plant in Gujarat. To secure the investment, India reportedly offered subsidies covering up to 75 per cent of the $2.5 billion capital cost. In addition, the government has provided production-linked incentives amounting to 4-6 per cent of invoice value. In total, India's support package amounts to approximately $1.95 billion to attract a $2.5 billion facility-one expected to generate only around 5,000 relatively low-paying jobs. Such realities raise fundamental questions about the economics of increasing local value addition through backward linkages.
Does this imply that Bangladesh has no viable path to enhancing high-tech value addition through backward integration? If so, how have relatively small firms in other countries managed to emerge as globally competitive and highly profitable component suppliers? These questions warrant deeper investigation.
Becoming a preferred component supplier in the global high-tech industry may require a trajectory similar to that of Zhou Qunfei. She drew global attention when seated between Tim Cook and Elon Musk at a state dinner hosted by Xi Jinping during the recent visit of Donald Trump. Her success in supplying glass panels for display modules for smartphones is not merely about cutting and polishing glass sheets. Founded in 1993, her company, Lens Technology, has built a formidable intellectual property base, holding over 2,200 authorised patents worldwide. Its portfolio spans advanced processing technologies, new materials such as sapphire and ceramics, smart manufacturing systems, anti-fingerprint coatings, as well as Computer Numerical Control (CNC) and screen-printing capabilities.
A similar story can be seen in Largan Precision. Starting from modest beginnings, Largan has grown into the world's leading producer of smartphone camera lenses and a long-standing supplier to companies such as Apple. To reach and sustain its position as a high-tech component manufacturer, Largan has accumulated more than 4,300 patents globally.
Since Bangladesh cannot outcompete large economies like India in terms of subsidies or domestic market size, it should instead draw lessons from the rise of companies like Lens Technology and Largan Precision. This raises a critical question: what is the "secret sauce" behind such success?
Conventional industrial development strategies-such as labour-intensive manufacturing, import substitution of mature products, and reliance on foreign direct investment-appear increasingly inadequate. Notably, both Lens Technology and Largan Precision capitalised on technological discontinuities, avoiding head-on competition with established incumbents. For instance, when Motorola sought glass panels for its Razr series phones, existing plastic panel suppliers were neither capable nor interested. Leveraging its expertise in watch glass, Lens Technology identified an entry point and scaled up through building a proprietary technology base.
Similarly, Largan seized the emerging demand for aspherical plastic lenses in mobile phone cameras. Like Lens Technology, it built scale through the cumulative development of ideas, capabilities, and specialised knowledge-rather than relying on low-cost labour or protected domestic markets.
Unfortunately, Bangladesh suffers from a lack of the capabilities, management competence, culture, and theoretical grounding required to follow the paths of companies like Largan Precision or Lens Technology in building firms that can increase local value addition through component innovation and manufacturing. It is important to note that the backward linkage strategy applied in the ready-made garments (RMG) sector does not readily translate to high-tech industries. Moreover, the economic frameworks currently guiding development planners and lenders are insufficient for this transition. Investments in R&D, setting up specialised technology university or the establishment of high-tech parks, in isolation, are also unlikely to deliver the desired outcomes.
Bangladesh requires a fundamental shift in education, mindset, culture, and industrial economic thinking to move up the value chain in high-tech manufacturing. This shift should begin with a deeper understanding of the mechanics of wealth creation-particularly how value emerges from the evolution of inventions and innovations, and how modest new entrants grow into large firms through a flywheel effect driven by the cumulative flow of ideas. This stands in contrast to the prevailing approach of asset accumulation through loans, subsidies, protection, and infrastructure expansion.
Given the rise in non-performing loans, increasing graduate unemployment, expanding debt for infrastructure, and the declining contribution of factory-floor labour to value addition, Bangladesh must first develop a clear understanding of how to enhance value creation at the component level-before setting targets, issuing regulatory directives, or committing substantial resources.
konuzzaman, Ph.D is academic, researcher and activist on technology, innovation and policy. Zaman.rokon.bd@gmail.com
