India’s electronics sector is undergoing a transformation that marks a decisive break from its past dependence on imported components. For years, the country’s manufacturing base was largely confined to assembling finished products using parts sourced from abroad, particularly China, reported ET Online.

That imbalance is now beginning to shift in a way few had foreseen. A surge in exports of electronic components from India to China signals the early stages of a structural reversal. What was once a one-way supply chain flowing from China into India has started to turn into a two-way exchange.

The most striking evidence of this reversal comes from Apple’s manufacturing ecosystem in India. Vendors based in the country supplying to Apple have exported a record $2.5 billion worth of components and sub-assemblies to China in FY26 so far, with projections suggesting this figure could reach $3.5 billion by year-end.

This represents a dramatic leap from $920 million in FY25 and almost negligible levels before that. The significance lies not only in the scale but in the direction of trade. For years, Chinese suppliers fed India’s smartphone industry.

Now, Indian facilities are sending critical components such as printed circuit board assemblies, mechanical parts and specialised modules back to China. Industry executives have described this as an upside from the Production Linked Incentive (PLI) scheme that was unimaginable when Apple first began shifting iPhone production from China to India in 2021.

This shift has been driven by a cluster of global and domestic manufacturers including Foxconn and TATA Electronics, who have built capabilities in India that are now globally competitive in both cost and quality.

The result is an early but clear indication that India is no longer just an assembly base but is beginning to participate more deeply in global value chains.

To understand why this reversal matters, it is necessary to revisit the structural limitations of India’s earlier model. For over a decade, growth was powered by final assembly. The PLI scheme successfully attracted global companies and scaled up output, especially in mobile phones.

Yet most components, materials and sub-assemblies continued to be imported, leaving domestic value addition stuck at around 15–20 percent. This meant that while India produced large volumes, much of the value accrued elsewhere, mainly in China, and manufacturers remained exposed to supply chain disruptions.

The Electronics Components Manufacturing Scheme (ECMS), launched last year, was designed to address this gap. By incentivising domestic production of components, materials and manufacturing equipment, it aims to transform India from an assembly hub into a fully integrated manufacturing ecosystem.

Without control over components, no country can sustain competitiveness in electronics manufacturing, and ECMS provides the framework to anchor production of critical inputs within India.

In electronics, real value lies less in final assembly and more in the components that go into a product. Circuit boards, display modules, connectors, battery cells and precision materials account for a substantial share of total value.

Control over these inputs determines cost efficiency, technological capability, resilience and innovation. The expansion of component manufacturing under ECMS reflects this reality, with approved projects spanning consumer electronics, automotive and strategic sectors.

By localising production, India reduces dependence on imports, lowers costs, improves lead times and becomes a more attractive destination for global firms seeking to diversify production.

India’s electronics ambitions rest on a three-part policy architecture. The PLI scheme created scale in finished goods. The semiconductor initiative aims to build upstream capabilities in chip fabrication and packaging. ECMS fills the critical middle layer by focusing on components and materials.

This integration ensures that gains in one segment reinforce others, allowing the system to function as a cohesive ecosystem rather than isolated initiatives.

The ultimate test of this transformation lies in domestic value addition. ECMS-backed investments are expected to double value addition to 35–40 percent over the next five years. This changes the economics of manufacturing, leading to better margins, stronger supplier networks and greater bargaining power in global markets.

It also ensures that growth translates more meaningfully into GDP expansion, exports and employment rather than being confined to low-value activities. The recent export data to China is an early indicator of this shift, showing that India is producing more and producing more of it domestically.

Component manufacturing is inherently more complex than assembly, requiring expertise in materials science, precision engineering, process control and automation. Expansion of this segment is creating a more skilled workforce and deeper technological capabilities.

Projects approved under ECMS are expected to generate tens of thousands of direct jobs, many demanding higher technical proficiency. Over time, this builds a foundation for advanced activities such as design, testing and research and development. As capabilities deepen, India’s role can evolve from manufacturing to innovation, essential for sustaining competitiveness in a technology-intensive sector.

Global disruptions during Covid and after highlighted the fragility of concentrated supply chains. Heavy reliance on imports exposes countries to geopolitical risks, logistical disruptions and price volatility. By localising production of key inputs, India is strengthening its strategic autonomy, particularly in sectors such as telecom, automotive electronics and other strategic industries.

The ability to export components to China adds another dimension, indicating that India is not only insulating itself from external shocks but also positioning itself as an alternative node in global supply chains.

India’s ambition to reach $500 billion in electronics production cannot be achieved through assembly alone. It requires depth, integration and sustained value creation across the supply chain. ECMS provides the policy framework to enable this transformation.

By encouraging long-term investments in components and materials, it lays the foundation for a more resilient and competitive sector. The surge in exports to China may still be at an early stage, but it represents a powerful signal that India’s manufacturing ecosystem is beginning to mature.

The reversal of supply chains has begun, and while the journey is only starting, the direction is unmistakably clear.

ET Online