India's Electronics Manufacturing Surge: PLI Scheme Drives Growth, Five Key Players Emerge

India is accelerating its electronics manufacturing capabilities, moving beyond component imports to establish a robust local production base. The government's Production Linked Incentive (PLI) scheme is a cornerstone of this strategy, aiming to transform India into a global manufacturing hub by enhancing innovation, efficiency, and competitiveness.

For the fiscal year 2025-26, the budgetary allocation for electronics and information technology hardware under the PLI scheme has been significantly increased from Rs 5,777 crore to Rs 9,000 crore, underscoring the nation's commitment to domestic manufacturing.

This policy push has already yielded impressive results. Local production of mobile phones has surged from 5.8 crore units in 2014-15 to 33 crore units in 2023-24, accompanied by a substantial decrease in imports and an increase in exports to 5 crore units. Foreign Direct Investment (FDI) in the sector has also seen a remarkable 254% rise.

The electronics manufacturing environment is currently at a tipping point, driven by converging demand for smartphones, consumer electronics, IT hardware, EV electronics, and automation, presenting a significant window for expansion.

The article identifies five leading Electronic Manufacturing Services (EMS) companies poised to capitalize on this growth: 1. **Dixon Technologies (India)**: Expanding mobile manufacturing capacity with a new campus, forming JVs for display modules, and increasing camera module production. It is also strengthening its telecom and IT hardware segments. 2. **Syrma SGS Technology**: Focusing on high-margin sectors like automotive and industrial, and investing in Printed Circuit Board (PCB) manufacturing to reduce India's import dependence on these critical components. 3. **Kaynes Technology India**: Transitioning from an EMS provider to a full Electronic System Design and Manufacturing (ESDM) player, with significant growth in automotive, EV, and rail electronics, and developing OSAT capabilities. 4. **Avalon Technologies**: Enhancing its capabilities in high-value precision-engineered products, expanding production capacity, and entering the semiconductor equipment manufacturing space. 5. **Elin Electronics**: Rapidly growing its EMS business in consumer durables with a new greenfield facility for high-volume appliance manufacturing.

While the sector shows immense potential, valuations for many companies are steep, indicating that significant future growth may already be priced into their stocks. Investors are advised to focus on execution strength and sustainable profitability.

Impact: This strategic focus on domestic electronics manufacturing is expected to drive significant industrial growth, create substantial employment opportunities, enhance India's technological prowess, and bolster its position as a global electronics hub. This will contribute positively to India's economic development and supply chain resilience. Rating: 9/10

Difficult Terms: * **Digitalisation**: The process of converting information into a digital format that can be used by computers. * **Production Linked Incentive Scheme (PLI)**: A government scheme that provides financial incentives to companies based on their incremental sales of manufactured goods, encouraging domestic production and investment. * **Information Technology (IT) hardware**: Physical components of computers and related devices, such as CPUs, memory, motherboards, and peripherals. * **Mass manufacturing of electronics (LSEM)**: Large-scale production of electronic goods. * **Foreign Direct Investment (FDI)**: An investment made by a company or individual in one country into business interests located in another country. * **Electronic Manufacturing Services (EMS)**: A company that manufactures electronic components or circuit boards on behalf of other companies (Original Equipment Manufacturers). * **Original Equipment Manufacturers (OEMs)**: A company that manufactures products or components that are purchased by another company and branded and sold as its own. * **Backward integration**: A strategy where a company purchases or merges with one of its suppliers to gain control over its supply chain. * **Original Design Manufacturer (ODM)**: A company that designs and manufactures a product that is then marketed by another company under its own brand name. * **Electronic System Design and Manufacturing (ESDM)**: A broader term encompassing the design, development, and manufacturing of electronic systems and products. * **Original Semiconductor Assembly and Test (OSAT)**: Companies that provide outsourced semiconductor assembly and testing services, crucial for chip manufacturing. * **Printed Circuit Board (PCB)**: A board on which a circuit is formed by etching channels in a copper sheet clad to a non-conductive base. * **High Density Interconnect (HDI)**: A type of PCB that allows for a higher density of components and interconnections, leading to smaller and more powerful electronic devices. * **Electric Vehicle (EV)**: A vehicle powered by electricity from a battery. * **Internet of Things (IoT)**: A network of physical objects embedded with sensors, software, and other technologies that enable them to connect and exchange data with other devices and systems over the internet. * **Enterprise Value to EBITDA multiple**: A valuation metric used to assess a company's value relative to its earnings before interest, taxes, depreciation, and amortization. A higher multiple can indicate higher growth expectations or a richer valuation. * **Return on Capital Employed (ROCE)**: A profitability ratio that measures how efficiently a company is using its capital to generate profits. * **Value Chain**: The full range of activities required to produce and distribute a product or service. * **Automation**: The use of technology to perform tasks with minimal human intervention. * **Components**: The individual parts or elements that make up a larger product. * **Smartphones**: Mobile phones with advanced computing capabilities and connectivity. * **Consumer Electronics**: Electronic devices intended for everyday use, such as televisions, refrigerators, and smartphones. * **IT Hardware**: The physical parts of a computer system, like the motherboard, processor, RAM, and storage devices. * **EV Electronics**: Electronic components and systems used in electric vehicles, such as battery management systems, motor controllers, and infotainment systems.