Can the Electronics Component Manufacturing Scheme push India past the assembly model production?

In October 2025, Kaynes Semicon Pvt. Ltd. became the first Indian company to package and ship multi-chip modules to a global client, California-based Alpha and Omega Semiconductor Inc., under the India Semiconductor Mission.

Kanyes Semicon and its parent, Mysuru-based electronics manufacturer Kaynes Technology Ltd., are now aiming higher. As India sets its sights on becoming a $500 billion electronics manufacturer by FY30, they want to climb up the electronics value chain. Kaynes Technology and Kaynes Semicon have applied under three categories of the newly launched Electronics Component Manufacturing Scheme (ECMS) to make semiconductor capacitors, full-camera modules and display modules.

“The camera solutions in the market today are mostly based on Chinese components or off-the-shelf semiconductors,” says Raghu Panicker, Chief Executive Officer of Kaynes Semicon. “With our camera module solution, we are achieving 100% localisation.”

A full-camera module includes essential components of a camera—image sensor, lens and a processing unit—all mounted on a printed circuit board (PCB). This unit goes into smartphones, smart home devices and automotive systems.

The Missing Middle

For decades, India has been dependent on overseas suppliers for semiconductor and components that are the backbone of electronics, a potentially strategic vulnerability in times of global supply chain disruptions and crises such as the Covid-19 pandemic.

For instance, every new iPhone or smart TV rolling off an assembly line in Tamil Nadu or Uttar Pradesh’s Noida is powered by a value chain that’s still based abroad. In the aftermath of the pandemic, a shortage of semiconductors caused automobile production cuts and delayed deliveries.

That gap between supply and demand is something the government is trying to address through the India Semiconductor Mission and the ECMS.

India’s electronics production has grown from `1.9 lakh crore in 2014–15 to `11.3 lakh crore in 2024-25, paced by smartphone assembly, computer hardware and telecom equipment.

Even so, domestic value addition, the share of locally made parts and sub-assemblies, hovers between 18% and 20% of output, about half China’s or South Korea’s 40%.

The gap is particularly stark in components; India imported nearly $35 billion worth of parts in FY24, according to the Ministry of Commerce, ranging from PCBs, connectors and sensors to semiconductors—most of them from China, Hong Kong, Taiwan and Vietnam.

To plug the gap and build a robust electronics component manufacturing ecosystem, the cabinet approved ECMS in April 2025 with an outlay of `22,919 crore. Within a month of the closure of the application window, MeitY had approved seven projects worth `5,532 crore. Kaynes Circuits received approval for four projects along with one each proposed by SRF Ltd, Syrma Strategic Electronics and Ascent Circuits.

“If we break down the cost of a smartphone by major components, 60–70% goes to the chipset, followed by memory, then the camera, battery, and finally, the display. These components account for most of the bill of materials. The remaining cost comes from RLC components and the PCB,” says Rahul Sharma, Co-founder of Bhagwati Products Ltd. RLC or RLC circuit is an electronic circuit with a resistor, inductor, and capacitor.

Given the backdrop of the cost breakdown, nearly 60% of the $500 billion electronics manufacturing target will have to come from components, says Sharma.

The question is how fast can India build this missing middle?

A New Push

“The assembly line part is not very high-tech manufacturing. This means if the cost goes up, it can shift. Like (it did) from China and shifted to Vietnam and India, it can shift from here to some other location,” says S. Krishnan, Secretary, Ministry of Electronics and Information Technology (MeitY). “So, we have to make sure that we deepen the value addition in the country, so that the shift is not so easy, and India stays competitive as a location for (electronics) manufacturing.”

In electronics manufacturing, the value chains are global and that’s true even for China, the world’s undisputed manufacturing powerhouse.

“Not even China has 100% value addition. Their proportion (in components) is only about 40% in case of mobile phones and certain electronics,” says Krishnan. “So, with this scheme, India’s goal is to double the value addition, from this present 18-20% to 35-40%.”

And the time is ripe for India to become an alternative source of exports in the electronics component ecosystem rather than just boosting production for domestic use.

“You have to have two or three alternative sources of supply for anything. So, in that context, we have to make the components well enough to become a part of the global value chain,” says Krishnan.

Strategic Picks

After extensive consultations with industry, the government has strategically picked two kinds of components to encourage their production—those in which India already has a presence, and high-value components in which it lacks substantial heft.

ECMS spans four categories: sub-assemblies, bare components, selected bare components and supply chain ecosystems, and capital equipment. Bare components refer to products like capacitors and resistors, also known as passive components; selected bare components are parts required for a specific project.

“Passive components are critical and great first few steps to strengthen the base manufacturing supply chain. These are moderate to highly sophisticated, going into almost every modern electronic device from smartphones, TVs, wearables, surveillance cameras, PCs, automotive to artificial intelligence servers. Most of these PCBs are mainly sourced from incumbent suppliers from China, Taiwan, South Korea,” says Neil Shah, vice president, Counterpoint Research.

The response has been overwhelming. As of October 2025, 249 proposals worth `1.15 lakh crore had been received, nearly double the government’s expectations. The proposed production value was `10.3 lakh crore, with the potential to generate 140,000 jobs.

Applicants include Dixon Technologies, Zetwerk Electronics, Tata Electronics and Bhagwati Products, along with micro, small and medium enterprises and companies from Taiwan and Vietnam.

“We also are making sure that whoever comes on stream first manufactures, starts the process, and gets the subsidy. We have made it very clear to all the applicants,” says Krishnan.

Turning Policy Into Production

Industry veterans say that India’s climb up the electronics value chain will be a long haul. Back in 2010, when Nokia feature phones were made in India, about seven or eight categories, including displays, housings, connectors, power supplies, were 100% localised, says Josh Foulger, CEO of Zetwerk Electronics.

“We were cheaper than China across the entire bill of material stack and exported to 110 countries,” adds Foulger, director of Nokia India for 17 years until 2015; he later spearheaded the operations of Bharat Foxconn International Holdings until March 2024.

That ecosystem collapsed when Nokia’s factory shut down in 2014 amid a global restructuring exercise. Around the same time, Chinese smartphone brands like Xiaomi, Vivo, and Oppo entered India with an assembly-led model, importing semi- or completely knocked-down handset kits to assemble locally.

Execution is Key

Policy gaps didn’t help. Before the Phased Manufacturing Programme of 2016–17, there were no strong incentives for localisation. Assembly was cheaper and faster. Component manufacturing required larger investments, precision tooling and demand in the form of long-term contracts.

Today, on the back of Production Linked Incentive schemes for smartphones, information technology hardware and others, India has managed to reach a scale where there is sufficient demand for stepping up the value chain of components manufacturing.

Zetwerk, a contract manufacturer, has applied under ECMS. The company took stock of both the mechanical bill of materials and the electronics bill of materials to understand areas it can participate in. It has already cleared the first review with MEiTY and has to now secure ToT (transfer of technology) partners, adds Foulger.

While the ECMS policy has been well received, its success hinges on execution.

“Incentives and disincentives are the two guide rails needed today,” says Foulger. “If you import a phone housing, there’s a 10–15% basic custom duty, which justifies making it in India. A mix of disincentives to import and incentives to manufacture will make ECMS work.”

Electronic component manufacturing demands precision, scale, and steady infrastructure. Joint ventures will play a key role.

“A similar journey took place in the Indian automobile industry. Around 30 years ago, companies like Honda, Kawasaki and Suzuki entered India through joint ventures. Indian companies learned from them, and gradually, a domestic component ecosystem began to develop. Today, India has its own fully established automobile ecosystem. The same trajectory is expected in electronics,” says Sharma.

Mapping India’s Component Hubs

Every great electronics economy rests not on assembly lines, but on networks of component suppliers. India’s next leap will depend on where and how this backbone develops.

Industry insiders suggest creating value chain clusters around existing electronics manufacturing hubs, much like Manesar and Pune did for auto components in the 1990s.

“The idea is to build closer to existing clusters but also create capacity in Tier-II cities and Tier-II states. First, expand into Tier-II cities within existing manufacturing states, and second, add new states that haven’t been part of the electronics ecosystem yet,” says Foulger.

States are pitching in. Tamil Nadu, Gujarat and Uttar Pradesh have launched state-specific electronic component manufacturing schemes with some offering matching subsidies, waivers and duty exemptions.

Five years ago, India was barely assembling mobile phones. But today, it’s exporting them even to the US.

The base for component manufacturing is now visibly taking shape. Apple, for instance, has already plugged 45 companies into India’s supply chain, and more are likely to follow under the ECMS.

Of course, the ecosystem will take time to mature. After all, even China didn’t build all its capability overnight. The ecosystem evolved over time, first in Japan, then South Korea, followed by Taiwan, and then China. It took China nearly 20 years to become a global leader.

India has just begun to chart its path.