India Rises as Electronics Hub: Global Manufacturers Shift Gears from China

India’s electronics manufacturing to a staggering USD 1 trillion within the next five years.

The global electronics manufacturing sector is witnessing a significant realignment as companies increasingly diversify their supply chains, moving away from traditional bases like China. India is emerging as a major beneficiary of this shift, driven by a comprehensive suite of strategic governmental initiatives aimed at boosting local manufacturing and attracting substantial foreign investment.

S Krishnan, the Secretary of the Ministry of Electronics and Information Technology (MeitY), recently underscored the government’s ambitious goal to expand India’s electronics manufacturing to a staggering USD 1 trillion within the next five years. This bold target builds on an already robust foundation, with the electronics manufacturing industry currently valued at approximately USD 100 billion annually, and the software production sector generating between USD 200 billion to USD 250 billion in revenue.

The Indian government’s strategy includes a variety of incentives designed to enhance the country’s manufacturing appeal. Key measures include tax rebates, streamlined processes for land acquisition, and significant capital investment support. These efforts align with the national objective to elevate electronics to one of the top export categories by 2025-26, thus contributing significantly to a projected $1 trillion digital economy, according to the India Brand Equity Foundation.

Recent data showcases the effectiveness of these policies. For instance, India’s share of electronics exports to the United States saw a remarkable increase, rising to 7.65% in November of the previous year, up from just 2.51% in November 2021. Similarly, market share in the UK climbed from 4.79% to 10%, reflecting India’s growing competitive edge in the global electronics sector and the broader geopolitical impacts reshaping supply chains.

Experts from Boston Consulting Group (BCG) and various market analyses suggest that the pivot in manufacturing bases is both a strategic response to geopolitical tensions and a proactive effort to mitigate future risks by diversifying manufacturing locations.

India’s national policy on electronics is set to create a $400 billion electronics manufacturing ecosystem by 2025, enhancing both exports and domestic production to decrease import reliance. The focus is particularly sharp on high-growth areas like semiconductors, mobile devices, and consumer electronics. Initiatives such as the Phased Manufacturing Programme (PMP) have significantly spurred the production of mobile phones, promoting the gradual localization of mobile phone components.

Additionally, the ongoing global geopolitical tensions, particularly between the U.S. and China, have accelerated the shift toward alternative supply sources. India is capitalizing on this trend by offering a stable and skilled workforce, coupled with an improving regulatory and business environment, making it a viable alternative not just for low-end manufacturing but also for high-tech electronics.

The emergence of India in the electronics export market underscores a shift in global economic dynamics where companies are increasingly prioritizing supply chain resilience. The COVID-19 pandemic highlighted the risks associated with over-reliance on a single country for manufacturing needs, prompting a reassessment and broadening of supply chains among global firms.

As these developments continue to unfold, the impact on global supply chains and the geopolitical landscape will be profound. India’s rise as a central hub in electronics manufacturing marks a significant milestone in the industry, promising a more balanced and resilient supply chain for the global market. This strategic shift is likely to have long-term implications for the global electronics market, as India not only boosts its export volumes but also ascends higher in the value chain of electronics manufacturing.

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