Make in India pushed electronics to deliver volume. Depth is still loading

In early January the government approved investments worth nearly 50,000 crore rupees. This money was meant for manufacturing mobile enclosures. These are the metal frames inside your phone that hold all the components together. Naturally, it's not the kind of decision that usually gets attention. Still, this approval points to something important about how India is rethinking its electronics manufacturing. You see, over the last decade the country has focused on building manufacturing capacity. Assembly lines have expanded quickly, smartphone production rose sharply and global brands increased their presence in India. By 2024, India was producing 3.5% of the world's electronics and had also become the second largest manufacturer of smartphones. That growth followed a clear pattern. And in electronics manufacturing services companies or EMS companies, organized themselves around scale. Large volumes made tin margins workable. Bigger factories helped secure global contracts. Basically, scale became the main driver of growth. Other parts of the ecosystem though moved slower, design, component manufacturing and ownership of technology remained limited. Much of the deeper works stayed outside the country, even as the final assembly shifted in works. Joint ventures with foreign original design manufacturers played a central role during this phase. These partnerships helped in informs manufacture complex products and brought process discipline into local factories. They also influenced how much control or lack of control in companies had over design decisions and future product road maps. The electronics component manufacturing scheme is meant to respond to this imbalance. By encouraging domestic production of components like mobile enclosures, the government is trying to strengthen the middle of the supply chain and increase value addition. For manufacturers, this marks a turning point. Scale still matters. At the same time future growth depends on engineering capability, design depth and long term investment in research. China's experience in this regard often comes up because its electronics ecosystem evolved differently over time. And that comparison raises a question India's electronics industry is now facing. How far can an ecosystem build around assembly go before it needs to own the technology that it produces? Welcome to daybreak, a business podcast from the camp. I'm your host, Nikita Sharma and I don't chase the new cycle. Instead, every day of the week, my colleague Rachel Varghese and I will come to you with one business story that is worth understanding and with your time. Today's Tuesday, the 20th of January. To understand why this question matters, it helps to look at how India's AMS companies have operated so far. For firms like Dixon Technologies, Tata Electronics and SIRMA SGS, scale became the organizing principle. In a business with thin margins, scale helped to stabilize operations. Roger factories made it easier to handle big orders and also to manage costs. Anand Dubey, the founder and CEO of Intel Technologies, describes scale as a base layer. Higher volumes allow companies to invest in research, attract skilled talent and think about intellectual property. Without that foundation, those investments are hard to sustain. And this is the thinking that shaped expansion strategies. Development ventures or JVs became the fastest route forward. Partnerships with original design manufacturers from China, the US and Taiwan helped Indian companies move into products like smartphones and TVs. JVs such as Dixon Longcher, Bhagwati Joaquin and SIRMA SGS Shinhyup supported India's manufacturing growth. By 2024, India accounted for 3.5% of global electronics output. To understand this better, let's look at Dixon. It shows both progress and constraint. The company is expected to produce around 40 million smartphones in FY26 and controls over half of India's mobile outsourcing market. Its annual reports show R&D or research and development spending below 1% of their revenue. Chinese contract manufacturer Joaquin Technology began in a similar position and now spends around 5% of its revenue on R&D. Amrita Charya, the CEO of ZETWORK, explained this difference through capital allocation to my colleague Priyal Matta, a reporter at the can. He said where profits are reinvested reflects long term intent. For example, factory expansion and engineering capability signal different priorities. Now, government policy to reinforce this focus on scale. India's electronics push began with the national policy on electronics in 2012 followed by an update in 2019. The 40,000 crore rupees PLI scheme rewarded incremental output. Manufacturing capacity responded quickly. Mobile manufacturing units grew from 2 to nearly 300 in just over a decade. And this explains why among large listed EMS companies with 4 in joint ventures, R&D spending ranges from just 0.2% to 0.9% of revenue. Dixon's patents are valued at around 2 crore rupees. SIRMA SGS's intangible assets grew mainly through acquisitions. Among these companies, Keynes Technology stands out slightly with higher R&D focused on concept exploration rather than defined product by blacks. Joint ventures or JVs transferred manufacturing discipline and quality systems. According to analysts, Sanchat Veer Kogya control over design direction usually remained with 4 in partners. Another EMS executive described knowledge sharing as limited to current manufacturing needs. As a result, most local design work involves adapting existing products. Pratur Vardhan Singh of Counterpoint Research pointed out to us that India has design engineers but lacks companies that own end-to-end product intellectual property. More on this in the next segment, stay tuned. China's electronics industry began in a familiar place. In the late 1990s, it served as a low-cost manufacturing base for global companies including Apple. Over time, manufacturing components and research evolved together. Industry professionals often cite speed as an early advantage. Electronics plants in China typically came up in about 18 months compared to 5 or 6 years in India. Infrastructure mattered, but ecosystem integration mattered more. When Apple under CEO Tim Cook moved manufacturing to Shenzhen, Chinese engineers worked closely with American teams. New designs quickly created demand for new components. Suppliers were sourced through dense local networks. And this supported collaboration and faster learning. Over time, China produced global smartphone brands like Xiaomi, Oppo and Vivo along with firms such as Huawei and Electric Vehicle Maker BYD. In fact, Huawei's journey kind of illustrates this arc. It produced its first original product in 1993 through reverse engineering and sustained R&D investment. 920s with AT&T, Nokia and Intel added learning while internal capabilities expanded. Today, Huawei spends over 20% of its revenue on R&D. By 2023, China accounted for roughly a quarter of global electronics exports. Also, proximity played a central role in all of this. Components, tooling, labs and engineers were located close together, allowing problems to be sold quickly. India's early smartphone brands, including Carbon, Lava and Micromax, struggled after Chinese brands enter the market in 2015. India is now trying to build ecosystem density through its electronics manufacturing cluster scheme, progress varies across states. Some in-informs are experimenting with different models. Z-Work began as an engineering-led company and later expanded to EMS, which now accounts for about a tenth of its revenue. Intel developed in-house design capabilities and launched its smartphone Wobble1 in November 2025. However, skills still remains essential for sustaining deeper R&D. But structural constraints persist. Many Indian companies lack design lineage, geopolitics affects technology flows. Design and manufacturing remain loosely connected with limited applied industrial labs linked to clusters. margins also remain thin and capital costs are high. Building a smartphone brand in India still involves dependents on suppliers from China, Taiwan or Korea for key components. The electronics component manufacturing scheme addresses parts of this challenge, depending on whether design and testing grow alongside production. But efforts like Wobble and Z-Work represent attempts at indigenous value addition. But a wider transition towards a design and innovation-led ecosystem will take time and repeated experimentation. 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