India’s electronics manufacturing industry has been on a fast track to success over the last decade, quickly becoming a global hotspot. At the heart of this surge is the booming Electronics Manufacturing Services (EMS) sector, which handles everything from design and production to testing, distribution, and servicing of electronic components for Original Equipment Manufacturers (OEMs).
As India races toward becoming a major electronics hub, the EMS industry is the backbone, powering innovation and driving the demand for electronics both at home and abroad, while pushing the boundaries of what’s possible in manufacturing.
Domestic Demand Surge
One of the primary reasons behind the growth of India’s EMS sector is the increasing domestic demand for electronic products. The Indian market has seen a nearly twofold increase in electronics production between FY17 and FY22, with further growth projected at a compound annual growth rate (CAGR) of 24% from FY22 to FY27.
This surge of the EMS sector is powered by a perfect storm of rising disposable incomes, skyrocketing digital connectivity, and the ever-growing embrace of consumer gadgets like smartphones, laptops, and home appliances.
India’s expanding middle class is contributing to a higher demand for affordable yet high-quality electronic products, putting pressure on local manufacturers to scale up and meet consumer needs.
Furthermore, India’s focus on digital transformation, including initiatives like Digital India, has created a favourable environment for electronic manufacturing, fostering opportunities for EMS providers to expand their operations domestically.
Global Diversification Strategy
The global electronics supply chain is undergoing significant changes due to geopolitical tensions, particularly the US-China trade war, and recent supply chain disruptions caused by the COVID-19 pandemic.
As a result, many global brands are looking to diversify their manufacturing bases, which has given rise to the “China + 1” strategy. This approach involves companies reducing their reliance on China by establishing production facilities in other countries, such as Vietnam, India, and Mexico.
Although China continues to dominate the global EMS market with its cost advantages, advanced industrial infrastructure, and established supply chain, India is emerging as a compelling alternative.
India’s competitive labour costs, improving infrastructure, and access to a large talent pool make it an ideal candidate for companies seeking supply chain diversification. Additionally, India’s strategic location serves as a gateway to global markets, enhancing its appeal as a key player in the EMS sector.
Government Incentives and Policies
The Indian government has been instrumental in driving the growth of the EMS sector by introducing several policy initiatives aimed at boosting domestic manufacturing.
One of the most impactful programs is the Production Linked Incentive (PLI) Scheme, which is designed to tackle challenges related to high capital costs in India. The PLI Scheme provides incentives ranging from 4% to 6% on incremental sales of goods manufactured in India, with a focus on sectors such as mobile phones, consumer electronics, IT hardware, and electronic components.
These four sectors alone account for over 70% of India’s domestic electronics manufacturing, showcasing the country’s capacity to cater to global demand. Furthermore, the Indian government has introduced initiatives to improve infrastructure, ease of doing business, and access to finance, making it easier for both domestic and international companies to invest in the EMS sector.
This policy-driven approach is crucial in positioning India as a viable competitor in the global electronics market.
Conclusion
As international companies seek to diversify production beyond China, India’s robust domestic manufacturing base presents a valuable opportunity for growth.
The country’s strong emphasis on mobile phones and consumer electronics showcases its ability to meet global demands effectively.
Leveraging India’s production strengths allows companies to spread their supply chain risks and avoid heavy reliance on a single location. With a pool of skilled labour and competitive manufacturing costs, India offers an attractive option for OEMs seeking stable, long-term partnerships with EMS providers.
These advantages position India as a rising hub for electronics manufacturing, ready to cater to both domestic needs and global markets.
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