India’s Electronics Manufacturing: Tackling Challenges, Seizing Opportunities

India’s electronics manufacturing industry is undergoing a transformative shift, driven by strategic government initiatives, increasing domestic demand, and a commitment to self-reliance (Atmanirbhar Bharat). Policymakers want India to become a global hub for electronics production, leveraging innovation, infrastructure, and private sector collaboration.

New initiative to boost electronics component manufacturing

India is preparing to launch a new scheme focused on manufacturing components for electronic gadgets like mobile phones, laptops, and tablets. This initiative aims to replicate the success of India’s mobile phone production sector and reduce dependence on imports.

Key highlights:

• Proposed investment: The central government plans to allocate INR 400 billion (US$4.7 billion) for this initiative, expecting to attract INR 820 billion (US$9.6 billion) in private investments.
• Projected output: The scheme could generate a total production value between INR 1.95–2 trillion (approximately US$23-23.6 billion) during its tenure.

A key goal is to strengthen local manufacturing of critical components, such as printed circuit boards (PCBs), displays, and capacitors. This aligns with the ‘Self-Reliant India’ (Atmanirbhar Bharat) initiative, aiming to:

• Create jobs and spur economic growth.
• Develop a resilient supply chain network.
• Reduce reliance on imports to bolster national self-reliance.

Growth drivers for electronics manufacturing

India’s electronics manufacturing growth is driven by mobile phones, automotive electronics, and industrial segments. Growth in the sector is fueled by several factors:

1. Policy support at the federal and state government level

• Production Linked Incentive (PLI) Scheme: Encourages domestic production of high-priority components like batteries, Printed Circuit Board Assembly (PCBA), and displays.
• Semicon India Program: Promotes semiconductor design and manufacturing.
• Relaxations for R&D: Import duty exemptions on imports for research and development (R&D) and testing to foster innovation.

2. Expanding domestic and export markets

Electronics production is expected to grow at a compound annual growth rate (CAGR) of 26 percent between 2023 and 2030, with a projected value of US$500 billion by 2030.

3. Focus on automotive electronics

Valued at US$10.6 billion in FY 2023-24, the automotive electronics market is projected to reach US$74 billion by FY32. The rise of electric vehicles (EVs) and advanced systems is driving this growth, with electronic content in vehicles expected to increase from 20 percent to 40–50 percent within a decade.

Path to value-added manufacturing

According to a recent report by the Confederation of Indian Industry (CII), India’s electronics industry needs a fundamental shift from its current import-reliant, assembly-driven model to a focus on value-added component manufacturing. 

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In 2023, India’s electronics production reached US$102 billion, supported by a component and sub-assembly demand of US$45.5 billion. This demand is anticipated to surge to US$240 billion by 2030, aligning with an electronics production target of 2030. The report emphasizes the critical role of PCBAs and other essential components in achieving this transformation.

As per industry observers, PCBAs are projected to grow at a robust 30 percent CAGR, as the segment is expected to reach a demand of US$139 billion by 2030. 

Additionally, five essential components, i.e., lithium-ion batteries, camera modules, mechanicals, displays, and PCBs—accounted for 43 percent of the total demand in 2022. This figure is projected to grow to US$51.6 billion by 2030, highlighting their strategic importance. While demand for these components is rapidly increasing, domestic production remains minimal, necessitating a heavy reliance on imports—a trend that India aims to reverse.

Establishing a local semiconductor manufacturing ecosystem

India is making strategic moves to establish itself as a significant player in the global semiconductor industry, an essential component of modern electronics. With semiconductors being essential to technology, from smartphones, EVs, and telecommunications to artificial intelligence, India’s focus on building a robust domestic semiconductor manufacturing base is both timely and necessary.

Key projects driving India’s semiconductor manufacturing

Under the ISM, five major projects have received approval, signaling a transformative era for the sector:

• Micron Technology’s Facility: A US$2.75 billion project, Micron’s semiconductor assembly, testing, marking, and packaging (ATMP) plant in Gujarat is set to become operational by 2025. The facility is expected to generate over 5,000 direct jobs and significantly reduce India’s reliance on imported chips.
• Tata Electronics ventures: Tata Electronics is spearheading two projects, including one focused on manufacturing silicon carbide chips for electric vehicles, a rapidly growing segment. With collaborations with global technology providers, Tata is aligning itself with global standards in semiconductor production.
• CG Power and Industrial Solutions: The company is venturing into semiconductor component production, particularly for industrial and automotive applications, leveraging its expertise in power solutions to cater to the emerging EV and renewable energy markets.
• Kaynes Technology: With a strong base in electronics manufacturing services, Kaynes is scaling up operations to include semiconductor component design and manufacturing, supporting India’s goals of technological self-reliance.

India has inked partnerships with countries like the U.S., Japan, and Taiwan, focusing on technology transfer, joint ventures, and supply chain resilience. The U.S.-India Semiconductor Collaboration under the Quad alliance has brought together expertise from both nations to bolster India’s capabilities.

To boost research and development in semiconductor production, initiatives such as establishing the Semiconductor Research Center in Bengaluru, Karnataka, are designed to promote innovation in chip design, addressing India’s longstanding challenges in developing semiconductor intellectual property.

Growing investments

Private players such as Vedanta are also entering the semiconductor domain, announcing large-scale investments in manufacturing fabs and foundries. This complements public sector efforts and highlights the sector’s growing attractiveness.

Increase in electronics exports

Exports of electronics products from India have witnessed a major jump. According to data from the Ministry of Electronics and IT (MeitY), electronics exports have surged from INR 382.6 billion (US$4.5 billion) in 2014-15 to INR 2.41 trillion (US$28.45 billion) in 2023-24, reflecting a CAGR of 22.7 percent.

Source: System on Foreign Trade Performance Analysis (FTPA) Version 3.0, DoC.

Source: Department of Commerce, System on Foreign Trade Performance Analysis (FTPA) Version 3.0

*P: The data for electronics exports from April to September 2024 is provisional and is subject to update.

One of the fastest-growing segments within the electronics industry is mobile phone manufacturing. According to MeitY, in 2014-15, only 26 percent of mobile phones sold in India were domestically produced, with the majority being imported. As of September 26, 2024, 99.2 percent of all mobile phones sold in the country are now manufactured locally.

India now produces between 325 to 330 million mobile phones annually, fulfilling domestic demand and driving substantial export growth. Mobile phone exports have surged from INR 15.66 billion (US$184.9 million) in 2014-15 to INR 1.2 trillion (US$14.1 billion) in 2023-24—a 77-fold increase. This dramatic growth can be attributed to policies such as the PLI scheme for the mobile sector.

Navigating opportunities and risks amid US trade policy shifts

India may have an opportunity to expand its exports in sectors like textiles, electronics, machinery, and pharmaceuticals if the United States enforces higher tariffs on goods from China and Mexico, according to media reports. The potential tariff hikes proposed by the US President-elect Donald Trump include an additional 25 percent on imports from Canada and Mexico and 10 percent on imports from China and could take effect through an executive order on January 20 (following Trump’s official inauguration).

Trump has justified the tariffs on Canada and Mexico as a measure to curb migration and on China to address issues such as the influx of drugs like fentanyl into the US.

One may note that India was not included in this initial wave of tariff measures. The US, India’s largest trading partner, accounts for annual bilateral trade exceeding US$190 billion.

Trade experts’ view India’s exclusion as a potential signal of strategic interest from the US to strengthen trade ties. This could lead to more favorable trade arrangements and partnerships.

However, some experts are cautious about jumping to optimistic conclusions. Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), points out that Trump’s tariff policies might have broader implications. He notes that the current measures are focused on addressing issues like drug trafficking and immigration, leaving room for other trade policy shifts that could impact India.

Challenges within the sector

India’s electronics manufacturing sector has achieved sharp growth in a decade; however, several persistent challenges hinder its ability to scale further and become a global hub. One of the persistent challenges for India is the heavy dependence on imports for critical components such as PCBs, sensors, and advanced displays. This reliance on external sources not only drives up costs but also exposes the supply chain to potential vulnerabilities.

Another significant challenge is the higher manufacturing costs in India compared to countries like China, Vietnam, and Mexico. Indian manufacturers face production costs that are 10–20 percent higher, making it difficult to compete in the global market, particularly for cost-sensitive electronics. This disparity is compounded by the limited presence of large-scale domestic corporations in the sector.

India also faces gaps in indigenous R&D. The lack of a robust R&D infrastructure limits the ability to design and manufacture advanced components domestically. Essential technologies, including semiconductors, sensors, and specialized components, remain underdeveloped. Adding to these challenges is limited access to raw materials, which further constrains local production and raises costs.

Policies to address long-standing challenges

To address these issues, the central government has introduced several initiatives aimed at strengthening the sector. Programs like the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS) provide financial incentives to promote domestic production and reduce reliance on imports. Increased collaboration between the government and private companies are also fostering a more robust manufacturing ecosystem by encouraging technology transfer, skill development, and innovation. Efforts are underway to rationalize import tariffs on essential components to make manufacturing more cost-effective. 

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India is also preparing to launch enhanced programs like SPECS 2.0 to support the production of high-priority components such as PCBs and lithium-ion batteries. Investments in R&D infrastructure, including the establishment of centers of excellence and increased funding for electronics research, aim to bolster India’s domestic design capabilities. Additionally, the promotion of startups and innovation hubs is fostering advancements in electronics and semiconductor design.

Outlook

Overall, India’s electronics manufacturing sector holds immense potential. With a strategic focus on reducing import dependency, lowering production costs, and fostering innovation, the country is well-positioned to build a competitive and sustainable ecosystem. These efforts are crucial to establishing India as a global leader in electronics manufacturing and securing its place in the international value chain.

India’s electronics manufacturing industry is poised to be a key driver of economic growth. With the rollout of 5G, the expanding EV market, and increasing demand for IoT-enabled devices, the sector has ushered into a new era of sectoral growth and global demand. By 2030, it is projected to achieve a production value of US$500 billion, establishing India as a global hub for electronics manufacturing.

The central government’s upcoming scheme for electronics component manufacturing is a step in the right direction. By fostering innovation, supporting infrastructure development, and incentivizing private sector involvement, India is setting the stage for sustainable growth of its electronics industry.

(US$1 = INR 84.68)

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