India's Electronics Odyssey: From Biggest Buyer to Global Supplier?

The global electronics industry is on the verge of transformative shifts, and India, an emerging player, is no exception. Once almost entirely dependent on imports, India's electronic manufacturing sector is now marching toward self-reliance, or Aatmanirbharta, with hopes of becoming a significant exporter. Recent strides in manufacturing, robust policy support, and growing foreign investment signal a compelling shift in India’s electronics story. But can India truly transform from being a leading importer to a powerful exporter? Let’s delve into this evolving landscape.

Understanding India’s Electronics Import Dependency

India's love for electronics is undeniable. From smartphones and laptops to electric vehicles and wearable technology, demand has surged with rising disposable incomes and digital adoption. However, despite being the world’s second-largest smartphone market and rapidly expanding its electronics footprint, India manufactures only around 2% of the world's electronics but consumes a substantial 5% of it. As a result, electronics imports hit a whopping $76 billion in 2023, making it India's second-largest import category after crude oil​.

Key components like semiconductors, PCBs, and displays still come predominantly from abroad, with nearly 44% sourced from China. This dependency became particularly apparent during global supply chain disruptions, such as those triggered by the COVID-19 pandemic. India's heavy reliance on imports not only contributes to the trade deficit but also exposes the country to risks associated with geopolitical tensions and fluctuating global supply chains​.

Recent Wins in Electronics Manufacturing

Dixon Technologies, a leading Indian electronics manufacturer, recently made headlines with an impressive 263% increase in quarterly net profit. However, the stock dropped 7.5% in one day, underscoring the high expectations investors have for India's electronics sector. Such market responses reflect growing optimism, albeit cautious, about the sector’s growth potential.

Between 2017 and 2022, India’s electronics production nearly doubled, reaching $101 billion, driven primarily by mobile phone manufacturing, which now accounts for 43% of the country’s electronics output. This growth trajectory is bolstered by India's ambition to localise high-value components, supported by the government’s policy push for manufacturing and exports. As of FY24, India’s electronics exports grew by 23.6% to $29.12 billion, signifying the sector's potential to contribute substantially to India’s export portfolio​.

The Government’s Role: Policies Powering Progress

The Indian government has rolled out a series of strategic policies to bolster local manufacturing, reduce import dependency, and turn India into an export hub:

1. Make in India: Launched in 2014, this flagship initiative aims to transform India into a global manufacturing powerhouse. As part of this initiative, the government has allocated funds specifically for mobile phone and component manufacturing, making India the second-largest mobile phone producer globally​.
2. Production Linked Incentive (PLI) Scheme: The PLI scheme, with a budget of INR 1.95 lakh crore, incentivises investments across 14 sectors, including electronics. By rewarding incremental investments, the PLI scheme has attracted key global players like Apple, Samsung, and Foxconn to set up production facilities in India.
3. Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS): SPECS provides a 25% capital incentive for manufacturing critical components like semiconductors, PCBs, and displays, helping to create an ecosystem where local production can thrive.
4. Modified Electronics Manufacturing Clusters (EMC) Scheme: EMCs facilitate efficient collaboration among manufacturers and suppliers, optimising resources and bolstering India's manufacturing infrastructure.

India’s Strategic Advantages

India has several natural advantages that make it an attractive destination for electronics manufacturing:

• Young Workforce: India’s large pool of young, skilled workers is a significant asset. With millions joining the workforce annually, companies can meet talent needs effectively, especially for labor-intensive electronics assembly​.
• Cost-Effective Labor: Labor costs in India are relatively lower than in many competing manufacturing hubs like China, making it a cost-effective choice for electronics production.
• Ease of Doing Business: India’s ranking in the World Bank’s Ease of Doing Business Index improved from 142 in 2015 to 63 in 2020, which reflects a more favorable business environment for foreign and domestic investments​.

Global Players Entering India’s Market

Several global giants have embraced India’s manufacturing ecosystem:

• Apple: Manufacturing around 5% of its iPhones in India currently, Apple plans to increase this to 25% over the next few years.
• Foxconn: A world leader in electronics manufacturing, Foxconn aims to amplify its investment in India fivefold by 2026.
• Micron: With plans for semiconductor manufacturing in Gujarat, Micron is supporting India’s bid to establish a local chip manufacturing ecosystem.
• Samsung: The electronics giant is not only manufacturing 5G equipment in India but also expanding into laptop production.

These investments signify India’s emerging role as a critical player in the global supply chain, not just for assembly but increasingly for high-value components as well​.

Challenges to Overcome

While India’s journey in electronics manufacturing shows promise, several challenges persist:

1. Low Value Addition: Despite advancements, value addition remains around 15–20%. India’s long-term goal is to achieve 35–40% value addition by FY30, which requires strengthening local supply chains and investing in R&D for components manufacturing​.
2. Dependence on Imports for Key Components: Components like semiconductors and PCBs are still largely imported, making the sector vulnerable to external supply chain disruptions. To reduce this dependency, India will need advanced manufacturing facilities and substantial R&D investment​.
3. Need for Skilled Workforce: As the sector grows, so does the demand for a workforce skilled in high-tech manufacturing and semiconductor production. This calls for targeted skilling initiatives and training programs to equip the Indian workforce with the necessary technical expertise.

Can India Become a Net Exporter?

India’s transition to a net electronics exporter is a long-term goal but appears achievable with sustained policy support, large-scale investments, and a commitment to strengthening local manufacturing. Projections for 2030 estimate that India’s electronics manufacturing output could reach $278 billion, with exports potentially soaring to $111 billion. If successful, India could see a dramatic reduction in import dependency, while establishing itself as a global manufacturing powerhouse​.