Electronics & Component Manufacturing in India
India makes much of the world's smartphones but imports the parts. ECMS pays to localise the components, deepening India's electronics value chain for foreign makers.
India now makes a large share of the world's smartphones, but it still imports many of the parts inside them. The Electronics Component Manufacturing Scheme is the policy built to change that — and it is reshaping where the global electronics supply chain is made.
India is now the world's second-largest mobile-phone manufacturing country and one of the major global electronics manufacturing hubs, and electronics is among its fastest-growing export categories. But India still assembles far more than it makes: as of 2026, domestic value addition in electronics is only around 18 to 20 percent, and an estimated 70 percent or more of the components inside Indian-made devices — displays, chips, printed circuit boards, precision parts — are imported. The Electronics Component Manufacturing Scheme, launched in 2025, is the deliberate move to close that gap. For a foreign component or capital-equipment maker, it is the strongest reason in a decade to manufacture in India, and the structure of the entry decides how much of the incentive becomes cash.
At a glance
- India is the world's second-largest mobile-phone manufacturer but, as of 2026, adds only around 18-20% of the value domestically; ECMS exists to raise that by localising components.
- ECMS, run by the Ministry of Electronics and IT, incentivises sub-assemblies, bare components and capital equipment — the import-heavy middle of the supply chain. Its outlay was raised to about ₹40,000 crore in the 2026-27 Budget.
- In its first year the scheme drew roughly 249 applications and over ₹1 lakh crore of proposed investment; by early 2026 around 75 projects had been approved across four tranches.
- Incentives are turnover-linked, capex-linked or hybrid, part-tied to employment, over a multi-year tenure. Both greenfield and brownfield qualify.
- Approval is a sanctioned ceiling, not a payment — earned year by year against performance and claimed on audited data.
- Success turns on choosing the segment, the regime and the state together, and building the entity to claim the incentive — not on the headline rate.
From importer to manufacturing hub — and the gap that remains
A decade ago India imported most of its electronics. Today it is the world's second-largest mobile-phone manufacturer and a major global electronics hub. The turn came from a clear policy sequence: Make in India, a phased manufacturing programme that taxed imported handsets and rewarded local assembly, and from 2020 the Production-Linked Incentive scheme for large-scale electronics, which put roughly ₹41,000 crore behind output in finished-goods categories. Global brands followed. Apple's contract manufacturers — Foxconn, Pegatron and Tata Electronics — now run several plants in Tamil Nadu and Karnataka producing tens of millions of iPhones a year; Samsung runs one of the world's largest phone factories in Noida. As of 2025-26 the Indian electronics industry's turnover has crossed US$150 billion, and the iPhone has become India's single largest export item, at roughly ₹2 trillion, about US$24 billion, in FY2025-26.
That is the success. The limitation sits underneath it. India became a world-class assembler before it became a maker of what goes inside the box. Domestic value addition is still only around 18 to 20 percent as of 2026, because the printed circuit boards, the display and camera modules, the passive components, the lithium-ion cells and the precision parts are largely imported and simply fitted together in India. An assembly base built on imported components is exposed — to currency, to supply shocks, to the trade politics of the countries those components come from — and it captures only a thin slice of each product's value. Deepening that value chain is now the explicit objective of Indian industrial policy, and it is the opening for foreign component makers.
India in the global electronics map
India's component push is arriving at the moment the rest of the world is looking for exactly what it offers. A decade of concentrating electronics manufacturing in a single country has become a strategic risk for global brands, and the response — China-plus-one, supply-chain de-risking, call it what you will — is a deliberate search for a second source of scale. Few countries can absorb that demand. India is the one with the assembly base already in place, a billion-plus domestic market that anchors volume, a deep English-speaking engineering workforce, and a government willing to pay to deepen the value chain. Vietnam, Mexico and others compete for slices of the shift; for components at scale, and for the gravitational pull of the device market sitting next door to the plant, India's position is structurally strong.
The pull is visible in the numbers. As of 2025-26 India's electronics exports are growing at close to fifty percent year on year — roughly US$12.4 billion in a single quarter — and mobile-phone exports have multiplied many times over within a decade. In a striking reversal of the old pattern, Indian suppliers also exported around US$2.5 billion of components and sub-assemblies — printed-circuit-board assemblies and mechanical parts — to China in FY2025-26, early evidence that the localisation is starting to run upstream. The government's headline targets, a US$300 billion electronics manufacturing base and US$120 billion of exports, are deliberately ambitious, and the distance between target and current output is precisely the space ECMS is built to fill on the component side. For a foreign component maker the strategic reading is simple: the demand is in the country, the policy is paying, and the window to take a defensible position in the supply chain is open now rather than indefinitely.
ECMS: the move from assembly to value addition
The Electronics Component Manufacturing Scheme, notified in 2025 and run by the Ministry of Electronics and Information Technology, is built to do one thing: pull the component and capital-equipment layer into India behind the assembly base that is already here. It is the deliberate shift, in the government's own framing, from assembler to maker. The scheme launched with an outlay of about ₹22,919 crore and, on the strength of the response, that outlay was raised to roughly ₹40,000 crore in the 2026-27 Budget — a near-doubling that signals how central components have become to the strategy. The wider ambition it serves is a US$500 billion electronics manufacturing ecosystem by 2030-31.
The early response has been large. In its first year ECMS drew on the order of 249 applications carrying more than ₹1 lakh crore of proposed investment — roughly double the scheme's own target — and by early 2026 the government had approved around 75 projects across four tranches, representing some ₹61,000 crore of committed investment and tens of thousands of direct jobs. The approvals matter as much for what they localise as for their size: the projects span lithium-ion cells, flexible and high-density printed circuit boards, display and camera modules, connectors, passive components and, notably, a rare-earth permanent-magnet facility. India approved its first domestic plants for several of these categories under the scheme. (These tallies are current to early 2026 and move with each tranche; confirm the latest position at the time of decision.)
What India is localising: PCBs, lithium-ion cells, display modules and the component value chain
The scheme is aimed precisely at the parts of the supply chain that have been missing, and understanding the map is the first step for any entrant. ECMS spans three broad layers. The first is sub-assemblies — the display modules and camera modules that are among the most valuable single components in a phone. The second is bare components: multi-layer and high-density printed circuit boards, flexible PCBs, capacitors, resistors, inductors, connectors, antennas, relays, heat sinks, transducers and surface-mount passive components. The third is the capital equipment used to make all of the above, plus the upstream materials such as copper-clad laminates and specialised films. The latest tranche alone covered sixteen distinct component segments. Together these categories account for the large majority of a device's bill of materials — which is the point: the scheme localises the expensive middle, not the final assembly that India already dominates.
Two component families deserve particular attention because they connect electronics to India's other industrial bets. Printed circuit boards are the backbone of every electronic product, and India has historically imported most of them; the government's stated aim is for domestic output to meet around half of national PCB demand. Lithium-ion cells sit at the intersection of electronics and electric mobility — the same cell technology feeds phones, laptops, power tools and, at larger format, electric vehicles — and the localisation target here is higher still, on the order of three-fifths of demand. A foreign entrant should read its products against the current target list segment by segment, because eligibility, the incentive design and the competitive field differ markedly across them.
One economic mechanism underpins all of this and is worth grasping before choosing a component to make. India runs a phased-manufacturing approach — higher customs duties on finished goods and sub-assemblies than on the inputs and capital equipment behind them — so that importing a finished component is dearer than making it in India from imported materials, and the government has been correcting the inverted-duty structure in cases where an input was taxed more heavily than the output. That tariff structure, not the incentive alone, is what makes local component manufacture commercially rational. The practical reading for an entrant is that the subsidy is only half the economics: the duty position on a specific component and its inputs decides whether localising it actually pays, and the calculation should be run product by product. The procedural customs and duty-scheme detail sits on our trade and customs coverage.
Who is building, and what it signals
The clearest guide to where the opportunity is real is what serious manufacturers are already doing. On the assembly side, Apple's partners — Foxconn, Pegatron and Tata Electronics — have made India a primary iPhone production base, and Samsung's Noida plant is among the largest phone factories anywhere; that presence is the demand a component supplier sells into. On the component side, the early ECMS approvals are more telling still, because they mark firsts: India approved its first domestic surface-mount passive-component plant, its first flexible printed-circuit-board facility, and a rare-earth permanent-magnet unit, alongside lithium-ion cell and display-module projects — each a category India had previously imported almost in full.
Two things follow for an incoming investor. First, the anchor demand and the early movers de-risk the thesis: a component maker is not betting on a market that might appear, but supplying one that already runs at scale. Second, the first-mover advantage in each component segment is real and time-limited — the scheme has favoured those ready to produce early, the best cluster locations and state packages are being taken, and a defensible position in a given component is far easier to establish now than once the segment fills. The investors moving first are doing so for both reasons at once.
How the incentive works
ECMS offers three forms of support, and which one applies depends on the segment. The first is a turnover-linked incentive, paid on net incremental sales over a base year for eligible goods manufactured in India. The second is a capex-linked incentive, paid against eligible capital expenditure over a defined period. The third is a hybrid of the two. A portion of the support is tied to employment generation — part of the capex incentive is released only on meeting cumulative hiring thresholds, and the turnover incentive is trimmed if employment targets are missed. The scheme runs over a multi-year tenure, typically with a gestation period before the turnover incentive begins, and it has favoured manufacturers ready to begin commercial production early. The exact rates, base-year mechanics, capex windows and employment conditions are set in the scheme and its annexures, they vary by segment, and they change — so they must be confirmed for the specific product at the time of application.
The structural feature to plan around is simple and consequential: like the wider Production-Linked Incentive framework it sits alongside, ECMS pays against performance over time, not on selection. The incentive is a function of what the plant actually invests, makes and sells, year after year, measured against thresholds — not a grant handed over on approval. That single fact shapes every financial model and every structuring decision that follows.
Who qualifies
Both greenfield investment — a new plant — and brownfield investment — the expansion of an existing one — are eligible, which opens the scheme to manufacturers already operating in India as well as to first-time entrants. Eligibility turns on meeting the investment, sales and employment thresholds set for the relevant segment, with a defined minimum capital commitment in plant and machinery staggered over the scheme period. A foreign investor qualifies through an Indian entity that meets those thresholds and the ordinary foreign-investment and exchange-control conditions. Because the scheme has operated, in practice, on a first-mover basis for those ready to produce early, the advantage goes to entrants who have completed the entity, site and supply-chain work in advance and can move quickly once a window opens — not to those still planning when it narrows.
Where to build: the regime and the state
India has established electronics manufacturing hubs in Tamil Nadu and Karnataka, modified Electronics Manufacturing Clusters across roughly ten states — including Andhra Pradesh, Gujarat, Maharashtra, Telangana, Uttar Pradesh and Uttarakhand — and Special Economic Zones and STPI units for export-oriented manufacturers. The cluster scheme shares up to half the cost of common infrastructure, and the states compete hard on top of the central incentive. Tamil Nadu has launched its own electronics components scheme targeting some ₹30,000 crore of investment and 60,000 jobs, with subsidies that match the centre's; Uttar Pradesh pairs land at Jewar and the Yamuna Expressway corridor with its own electronics and semiconductor incentives; Karnataka, Telangana, Andhra Pradesh, Odisha and Assam each run their own frameworks, layering capital subsidies, stamp-duty waivers, power support and training grants over the central scheme.
The right location turns on the product and its segment, the incentive position and regime, proximity to the existing assembly base and the supply chain that feeds it, power and logistics, and the available talent. The China-plus-one shift adds urgency: global brands de-risking their dependence on a single country are actively seeking a second component source, and India is the scaled alternative with the demand already in place. In every case, the location and the regime should be chosen together and well in advance: the regime determines the tax and export treatment, the state determines a large part of the total incentive, and the two are decided as one, not in sequence.
How a foreign company enters
The vehicle is, in almost every case, a wholly-owned Indian private limited company. Most electronics manufacturing sits on the automatic foreign-investment route, meaning no prior government approval and no equity cap, subject to the ordinary security conditions. The one structural flag to clear early is Press Note 3: investment from an entity in a country sharing a land border with India — in practice, capital with a Chinese connection — requires prior government approval, and because much licensable component and cell technology is of Chinese origin, this is a live question for many electronics entrants and is best resolved before the structure is set. The entity, the route and the exchange-control reporting that follows are the same backbone covered on our India company-setup and manufacturing-entry guidance.
The electronics-specific structuring sits on top of that backbone, and it is where value is made or lost. Capital equipment for a component plant is high-value and often imported, so its pricing and the terms of any technology licence into the Indian entity have to be set at arm's length and documented from the start. Where the Indian plant will sell to or buy from group companies — components to an affiliated assembler, say, or materials from the parent — the transfer-pricing position is central, because a component subsidiary inside a multinational supply chain is exactly the kind of entity India's tax authorities examine. And the rising value-addition the scheme rewards means the supply chain has to be planned for genuine localisation over time, not assembled from imported kits. Each of these is a structuring decision that determines whether the incentive, once approved, is actually claimable — and each is best settled before the first invoice, not revisited under audit.
Build, buy or partner with an Indian EMS
Most ECMS entrants build — a new component plant on the automatic route — and the scheme is designed around that. But it is not the only way in, and the right route depends on how quickly scale and a customer base are needed. A foreign component or equipment maker can also acquire or take a stake in an established Indian electronics-manufacturing-services (EMS) company — the listed champions such as Dixon Technologies, Kaynes Technology, Amber Enterprises and Syrma SGS, and the captive scale of Tata Electronics, have become the channel through which much global volume already flows — or form a joint venture or technology-licensing arrangement that pairs the foreign firm's process IP with the partner's land, labour, customer relationships and incentive track record. Contract manufacturing through an existing player is the lightest-touch option, testing the market before committing capital. Build, buy or partner is a structuring and deal decision as much as an operational one — it shapes the FDI route, the transfer-pricing position and the incentive eligibility — and it sits with our inbound transaction-advisory work; the point here is that the greenfield plant the rest of this page assumes is one of several live routes.
Industry-specific compliance: product certification (BIS CRS, WPC, TEC, BEE) and e-waste EPR
Manufacturing in India is one decision; selling electronics into the Indian market is gated by a separate set of mandatory product approvals that a foreign entrant has to build into the plan from the start. The central one is the Bureau of Indian Standards Compulsory Registration Scheme (BIS CRS), administered for electronics by the Ministry of Electronics and Information Technology: a long and widening list of electronic products — power supplies, LED lighting, IT hardware, batteries, panels and a growing set of components — cannot be sold in India until each model is tested at a BIS-recognised laboratory and registered, and the covered list is expanded regularly, with further categories added through 2025-26. Around it sit wireless-equipment approval from the WPC wing for any radio-frequency device, type-approval from the Telecommunication Engineering Centre (TEC) for telecom equipment, and energy-labelling under the Bureau of Energy Efficiency (BEE). None of these is the foreign-investment question; each is a market-access gate with its own testing, lead time and cost, and a product that clears the factory but not the certification cannot be shipped.
The second obligation runs to end-of-life. Under the E-Waste (Management) Rules 2022, every producer, manufacturer and brand owner of electrical and electronic equipment carries Extended Producer Responsibility (EPR): mandatory registration on the central portal, annual collection-and-recycling targets set against the quantity placed on the market, and reporting — with the 2025-26 framework moving to a traded EPR-certificate model, widening the covered categories and raising recycling targets, and environmental compensation for shortfalls, with penalties that can run into crores. For a component or device maker this is a recurring compliance and cost line, not a one-off filing. These certification and EPR obligations are not where the structuring value sits, but they are real gates that decide whether product can ship — so the task for an electronics entrant is to map the exact certifications its products need, and the EPR liability they carry, into the entry timeline from the outset rather than discovering them at the port. ATB scopes that map as part of the entry plan.
Legal workstreams for an electronics entry
For most foreign electronics manufacturers, the legal work runs across:
- Indian subsidiary incorporation and FEMA reporting;
- Press Note 3 analysis, where capital, ownership or technology has a China or land-border connection;
- ECMS eligibility mapping and application support;
- state incentive and location structuring;
- land, lease, factory and construction contracts;
- technology licence, royalty and transfer-pricing documentation;
- import of capital equipment, customs and supply-chain contracts;
- customer contracts with OEMs, EMS players and group entities;
- exit and repatriation planning — dividends, buy-back or a future sale of the India business (see our cross-border tax and inbound transaction-advisory coverage);
- incentive claim documentation and audit-file preparation.
Timeline and sequence
An India electronics entry runs as a set of workstreams that should overlap rather than follow one another. The Indian company is incorporated first — a quick step — with the resident director, tax registrations, a bank account and the FEMA reporting on the inbound investment; where Press Note 3 applies, the approval it requires is the long pole and is best started at once. Alongside it run the ECMS application within the tranche window, the choice and securing of the site and regime with the relevant state, and the state incentive arrangement; then the plant fit-out and the import of capital equipment, the intercompany agreements and transfer-pricing policy, and the talent ramp from leadership outward. Commercial production starts the incremental-investment and incremental-sales clock the incentive is measured against, and the first audited claim follows a financial year-end, with verification and disbursement after that. The entrants who move fastest run the entity, the approval, the land and the hiring concurrently from the outset rather than in series. These are indicative stages only: real timelines vary widely by segment, state, site and approval path, the Press Note 3 position can extend them, and nothing here is a commitment or guarantee of any particular timeframe — each entry should be planned on its own facts.
Stacking ECMS, PLI and state incentives
ECMS does not stand alone, and the strongest entries treat the incentive position as a portfolio. The scheme sits alongside the broader electronics Production-Linked Incentive framework, which rewards output in finished-goods categories — the original large-scale-electronics PLI behind the smartphone boom is now in its final year in FY2025-26, with IT-hardware PLI 2.0 continuing and ECMS the principal component-side scheme — and alongside the state schemes described above. In principle the three are complementary: the PLI pulls finished-goods volume, ECMS pulls the components behind it, and the state adds capital and operating support on top. In practice they are distinct programmes with distinct eligibility, base years and claim mechanics, and they cannot simply be assumed to stack — the interaction has to be modelled for the specific products and entity, because a choice that maximises one can foreclose another. The incentive position should be designed across all three at the outset, not assembled one scheme at a time.
Approval is the ceiling, not the cheque
This is the single most important thing to understand before committing capital. An ECMS approval sanctions a maximum incentive; it does not pay it. The money is earned year by year against the investment, sales and employment conditions, then claimed on audited data and verified by the ministry before it is released — and the gap between what has been sanctioned across the wider incentive framework and what has actually been paid out is large and well documented. Most of that gap is not the government being slow. It is companies that were approved and then, for reasons that were structural and avoidable, did not fully claim: a missed investment year, sales that fell short of the base, a value-addition shortfall, documentation that did not survive verification. The discipline for an electronics entrant is therefore concrete — sequence the capital spend to clear each year's gate, define and record eligible sales to the scheme's terms, and build the verification file from day one. The gap between the headline number and the cash is the subject of a separate analysis: why an incentive approval is not the same as receiving the incentive.
The adjacent value chains: semiconductors, displays and batteries
Electronics components do not sit in isolation, and the entrants who understand the adjacencies structure better. Semiconductors are the layer above components: the chips that India is now drawing in through the India Semiconductor Mission are assembled and packaged onto the very printed circuit boards that ECMS localises, and a component strategy and a semiconductor strategy increasingly inform one another. Display fabrication is supported in parallel, addressing one of the two largest imported components in any device. And lithium-ion cells connect electronics to electric mobility, because the cell chemistry that powers a phone is, at larger format, the chemistry that powers a vehicle — which is why the same entrant is sometimes weighing ECMS for cells against the advanced-cell incentives in the EV programme. The strongest entries are structured across these connected value chains rather than treated as silos; for many groups the right answer spans more than one of them.
Where this goes wrong
- Treating the approval as committed money, and planning cash flow around a ceiling the plant has not yet earned.
- Reading products against an out-of-date target list, and applying in a segment the scheme no longer prioritises.
- Assuming ECMS, the electronics PLI and state incentives automatically stack, without modelling the eligibility and base-year interaction.
- Choosing a location for land cost alone, and missing the power, logistics, supply-chain proximity and matching state incentives that decide the real economics.
- Leaving the Press Note 3 position unresolved where the technology or capital has a Chinese connection.
- Leaving transfer pricing and the verification file until claim time, and handing the audit a contestable claim.
How ATB Corporate helps
ATB advises foreign electronics-component and capital-equipment makers on entering India and converting an ECMS approval into incentive actually received: the Indian entity and the route, including any Press Note 3 question; the fit of the products to the current ECMS segments and thresholds; the regime and the state, chosen together; the incentive position across ECMS, the PLI framework and the relevant state scheme; and the investment, sales and documentation plan that clears the performance gates and the verification, with the transfer-pricing and exchange-control structuring settled before the first invoice. For groups weighing India against a Gulf base, or combining the two, the decision sits within the India-UAE corridor the firm works across.
Electronics & Component Manufacturing — Answered
A Ministry of Electronics and IT scheme, launched in 2025, that incentivises the manufacture of electronics components, sub-assemblies and capital equipment in India — the import-heavy layer beneath final assembly. Support is turnover-linked, capex-linked or hybrid over a multi-year tenure, with the outlay raised to about ₹40,000 crore in the 2026-27 Budget. Rates and eligibility are set per segment.
Yes, through an Indian entity that meets the segment's investment, sales and employment thresholds and the usual foreign-investment conditions. Greenfield and brownfield both qualify. Capital with a Chinese connection should clear the Press Note 3 approval first.
Because India is now the world's second-largest mobile-phone manufacturer but adds only around a fifth of the value at home, importing most components as of 2026. Localising the components is what raises value addition and insulates the supply chain — the gap ECMS exists to close.
The decision turns on the product and its segment, the regime — a Special Economic Zone, an STPI unit or an Electronics Manufacturing Cluster — and the state, since several states match or exceed the central incentive with their own subsidies, alongside proximity to the assembly base, power, logistics and talent. It should be settled early and together with the regime and incentive choice, because the best locations and state packages are taken as the scheme fills.
ECMS rewards the component and equipment layer; the electronics PLI rewards finished-goods output. They can form one localisation plan but are distinct schemes with distinct eligibility and base years, so the interaction has to be modelled rather than assumed.
No. Approval sets a ceiling; the incentive is earned year by year against investment, sales and employment, then claimed on audited data and verified before payment. Across the wider framework far less has been paid than sanctioned, usually because firms miss thresholds or cannot substantiate claims.
It governs investment from entities in countries sharing a land border with India (in practice, capital with a Chinese connection). Press Note 2 of 2026 (issued 15 March 2026, on Cabinet approval of 10 March) liberalised it: a land-border beneficial owner of 10% or less with no control now uses the automatic route with DPIIT reporting, while a holding above 10% or with control still needs prior government approval. It matters in electronics because much component and cell technology is Chinese-origin, so the position should be resolved before the structure is set.
There is no fixed timeline, and none should be assumed: it varies by segment, state, site and approval path, and a Press Note 3 case can extend it. As a broad indication only, a component plant runs to many months before commercial production and longer before a full incentive claim — which is why the workstreams should start early and run in parallel.
Yes, the two connect: some groups weigh or combine an India electronics base with a Gulf presence for market access, treasury or holding reasons. ATB advises across the India-UAE corridor, so the India entry and any UAE leg can be structured together.
In Indian electronics, an ECMS approval is not incentive received: segment fit, the chosen state, the Press Note 3 position and the verification file decide what is paid.
Licensing, approvals and any tax treatment are decided by the authorities on the facts. Talk to our team when you are ready.
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