Path to Component Independence

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Path to Component Independence

Path to Component Independence

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Aug 01,25

India’s electronics sector is on an impressive growth trajectory. According to Commerce Ministry data, electronics exports surged 47 per cent during April–June this fiscal to $12.41 billion.

India’s electronics sector is on an impressive growth trajectory. According to Commerce Ministry data, electronics exports surged 47 per cent during April–June this fiscal to $12.41 billion. The US remained the largest export destination, accounting for 60.17 per cent, followed by the UAE, China, the Netherlands, and Germany. The imposition of 25 per cent tariff and additional penalties on India, effective on August 1, 2025, by the US would pose short-term challenge for exports as the rates are significantly higher than those imposed on other Asian countries - Vietnam (20 per cent), Indonesia, and the Philippines (19 per cent) each. However, experts hope the ongoing trade negotiations between two countries to create some positive outcome in next few weeks or months.

Meanwhile, India’s mobile phone exports continue to see exponential growth—rising from just $0.2 billion in 2017–18 to $24.1 billion in 2024–25, a 55 per cent year-on-year jump, driven by large-scale manufacturing for exports. India is now the world’s second-largest mobile phone producer, yet it continues to import $7.15 billion worth of smartphone components, over half of which come from China. Industry estimates suggest that Chinese firms currently supply 70–75 per cent of components used in India. While global giants like Apple, Samsung, and Xiaomi (through Foxconn and Wistron) operate assembly lines in India, most critical components—chipsets, displays, camera modules, and batteries—are still imported.

To curb overdependence, the Government of India has rolled out several measures aimed at restricting Chinese sourcing. In response, and amid its own fallout with the US, China has informally tightened the supply of components, capital goods, rare earths, and technical expertise to India. This has had a tangible impact on the production of electric vehicles and electronics. As a result, export-linked manufacturing worth $24 billion in FY25—projected to exceed $32 billion in FY26—is now at risk.

India’s reliance on China for critical raw materials underscores the urgent need for strong investments in research and development (R&D) to discover alternative materials, improve manufacturing processes, and enhance efficiency. Without such efforts, India risks remaining primarily an assembly hub, dependent on foreign technologies. To address this, the government has announced a ?250 billion Electronics Component Manufacturing Scheme, aimed at building a resilient domestic ecosystem.

China’s dominance in the global value chain—accounting for more than 25 per cent of parts and components worldwide—makes complete exclusion unrealistic. Even American and Japanese companies operating in India rely on Chinese imports for key raw materials and intermediate goods. Recognising this, NITI Aayog has reportedly suggested allowing minority Chinese stakes in joint ventures, with strict conditions on localisation and technology transfer. The recent Dixon Technologies–Longcheer Intelligence joint venture exemplifies how strategic partnerships with Chinese original design manufacturers (ODMs) can help Indian firms localise production of critical sub-components such as display modules, camera units, and battery enclosures, while strengthening global value chain integration.

Import substitution has shown success in low-tech sectors like toys, but high-tech and capital goods remain deeply tied to Chinese supply chains. Achieving true decoupling will require India to develop a comprehensive, end-to-end domestic supply chain backed by strong R&D capabilities.

As we mark our 79th Independence Day, this is a reminder that Make in India will remain incomplete unless India builds self-reliance in components and technology. True economic independence will come not just from assembling products but from designing, innovating, and manufacturing them at home.

Happy Independence Day to all our readers!