India’s electronics exports hit a record nearly $48 billion in FY26, cementing the country’s emergence as a global smartphone manufacturing hub. Smartphones alone accounted for over $31 billion of exports, driven by Apple’s expanding manufacturing footprint and rising shipments to the US and Europe.
Yet, the export success masks a deeper reality: much of the value inside those devices still comes from China. Semiconductor chips, display assemblies, camera modules, printed circuit board inputs, connectors, sensors, manufacturing equipment and several industrial inputs continue to be imported, underscoring the gap between assembling electronics and building a self-sustaining manufacturing ecosystem.
That dependence, however, is not unique to India. Electronics manufacturing is organised around deeply integrated global value chains where components routinely cross borders before a finished product reaches consumers. Even China imports advanced semiconductor chips from Taiwan and South Korea, and manufacturing equipment and specialised materials from Japan, while Vietnam also relies heavily on imported components for its export-led electronics industry. The difference lies in the depth of the domestic ecosystem.
Scale Illusion
Industry estimates peg domestic value addition in smartphones manufactured in India at around 18-20%, compared with roughly 35-45% for globally integrated products manufactured in China and substantially higher across many other electronics categories where Chinese suppliers dominate the value chain.
The production-linked incentive (PLI) scheme has nevertheless achieved its first objective of creating manufacturing scale. India is now the world’s second-largest mobile phone manufacturer, with production rising nearly 28-fold since 2014-15. Apple, which initially planned to shift only around 10% of iPhone production to India, now assembles one in every four iPhones sold globally in the country. In calendar year 2025, iPhones accounted for nearly 75% of India’s smartphone exports and 46% of electronics exports. But the PLI target of raising domestic value addition to 35-40% by FY26 remains elusive, highlighting that assembling products and manufacturing their components are fundamentally different propositions.
The government’s strategy is now shifting towards closing that gap. “We began with manufacturing finished products in India. This helped us build scale and skills. Next, we moved to modules and components. We are working on designing and manufacturing equipment used in electronics production. Next, we will go for manufacturing materials used in electronics production. Step by step, we are developing the entire ecosystem for electronics manufacturing in India,” Electronics and IT Minister Ashwini Vaishnaw had told FE during an interaction earlier.
ECMS Shift
That thinking underpins the electronics component manufacturing scheme (ECMS), which has attracted investment commitments of over Rs 1.15 lakh crore against an initial target of Rs 59,350 crore, prompting the government to enhance its outlay to Rs 40,000 crore.
Industry believes the ecosystem is beginning to take shape. Apple and its suppliers are understood to be working with around 40 companies to develop a local component base in India as production volumes rise. But Faisal Kawoosa, chief analyst at Techarc, said the biggest challenge is commercial viability rather than engineering capability. “India has adequate design and engineering talent. The bottleneck is developing commercially viable components at scale. The PLI scheme has largely encouraged final-product manufacturing, leaving gaps in the component ecosystem that keep production costs high and limit competitiveness against China,” he said.
Pankaj Mohindroo, chairman of the India Cellular and Electronics Association (ICEA), believes India has made significant progress in reducing dependence on China in finished electronics, particularly smartphones. Progress has been visible in PCB assembly, mechanical parts, chargers, cables, packaging materials and selected battery manufacturing, with supplier clusters emerging around major manufacturing hubs. But semiconductors, displays, memory, sensors, camera modules and advanced manufacturing equipment continue to be largely imported. “The supplier ecosystem for these products has taken decades to develop in East Asia and cannot be replicated overnight,” he said, adding that long-term policy certainty would be critical to attract global suppliers.
The government’s objective is not complete decoupling from China but reducing concentration risk by strengthening domestic manufacturing while diversifying sourcing towards Taiwan, South Korea, Japan and Europe. India’s trade deficit with China widened to $112.1 billion in FY26 despite the boom in electronics exports, illustrating how deeply upstream supply chains remain intertwined.
For India, the next phase is no longer about proving it can assemble the world’s electronics. It is about proving it can build the supplier ecosystem beneath them.