Beyond China: Can India Build a Complementary Hub in Global Electronics Manufacturing?

Written by Jacob Wienken, Msc. Global Political Economy of China and Europe 

In April 2025, following new rounds of American tariffs on Chinese imports, Apple announced it plans to move the entire iPhone production for the US market from China to India ①. This marks a drastic strategic realignment for a company that produced most of its products in China for more than two decades. Shortly after, Apple's main supplier Foxconn announced to invest 1.5 billion USD into production capacity in India. Other companies, such as LG, have made similar announcements, supporting the impression that India is in fact becoming a production hub for electronic goods, rivaling China’s dominance in the sector. These announcements all reflect the China + 1 strategy, where companies maintain a base in China, but add additional bases to reduce supply chain risks.  

As of now, however, China is still dominating global electronic manufacturing, with a share of more than 60 percent of production ②, a presence in almost all segments of the supply chain, and a deeply integrated ecosystem. These recent shifts of electronics production to India raise the question: Are they merely symbolic moves, or is this the beginning of a global manufacturing shift? With its vast labour force and growing economic strength, can India develop an electronics manufacturing hub capable of capturing a significant portion of the global electronics manufacturing? 

China’s Rise in Electronics Manufacturing and the Current State of Global Supply Chains 

Since opening its economy in the 1990s, China has gradually become a global player in the electronics industry. It now accounts for more than 60 percent of global electronics manufacturing, controlling almost all parts of the supply chain. A core part of achieving this position was integration into the global electronics value chain ③, which can be separated into four parts ④. 

First, Original Design Manufacturers (ODMs), such as Foxconn, design and manufacture products for global brands, which then sell the final products to consumers. Despite their role in product development, they usually capture only a small share of the final value. 

Second, component manufacturers produce intermediate parts such as chips, displays, or batteries that are supplied to downstream producers. 

Third, electronics manufacturing services (EMS) providers assemble these components into finished products, a stage typically characterized by low value added and large-scale, labour-intensive production. 

Finally, brand owners such as Apple design products, control intellectual property, and market them directly to consumers, capturing the largest share of value creation ④.  

China has gradually developed capabilities across all four segments of this value chain and today plays a central role in most parts of global electronics manufacturing. China initially entered the global value chain through final assembly. Firms imported intermediate components, assembled them into finished products, and then re-exported them to global markets. Through knowledge spillovers from foreign firms， China gradually moved into more advanced segments of the supply chain and shifted to a model of higher value-added trade ③. 

Strategic government policies have been crucial for this development. One important policy was the creation of special economic zones with business-friendly environments through which China attracted massive FDI inflows, which built the foundation of its manufacturing ecosystem. Furthermore, especially in the beginning, China applied low tariffs on medium-processed products and components, which were then assembled and reexported ③. 

The Shift of Electronics Manufacturing to India 

As mentioned, several big electronics manufacturers have recently announced the relocation of significant production shares from China to India. As data on foreign direct investment (FDI) in India suggest, these recent announcements were part of a larger picture.   

Figure 1: FDI in electronics and components industry ⑤. 

During the last decades Foreign direct investment in India has strongly increased. The electronics sector has been no exception to this trend. As can be seen in the above graphic, in the last five years, FDI inflow in the electronics and components industry has increased strongly from around 800 million USD in 2021 to 2.4 billion USD in 2024. Not only did the absolute foreign investment increase, but also the relative foreign direct investment in the electronic manufacturing industry increased compared to the overall FDI inflow. Other metrics, such as the production volume of electronics, show a similar trend. Here, the production value increased from 37 billion in 2016 to 115 billion in 2024 ⑤.  

While most of this growth is fuelled by export lead production, Indian domestic demand is also increasingly served by local production. While in 2014, 80 percent of phones were imported, now more than 95 percent are locally produced ⑥. With a growing population and a growing middle class, the domestic market can in the future be a valuable asset for India's electronics industry.  

India's Comparative Advantage 

India's underlying economic factors are favourable for the mass production of electronic goods. With the globally largest population that is expected to continue to grow in the foreseeable future, India can provide the needed human capital to produce electronic goods on a global market scale. At the same time, China’s population has already peaked, and the median Indian is now ten years younger than the median Chinese person ⑦. Furthermore, average wages in China have risen to around 800 USD over the past decades, while Indian wages remain at an average of 188 USD ⑧. Based on these core economic numbers, it seems that India clearly has the potential to become a hub for global electronic manufacturing. 

In addition to these baseline economic factors, which could set the stage for strong growth in the manufacturing base, the recent change in the global geopolitical landscape has great implications for India's electronics manufacturing sector. Friendshoring, a more recent trend that describes production shifts to politically aligned countries, could benefit India strongly, with potentially higher investments from the US, Europe, and other democracies.  

Furthermore, India has recently finalised Free Trade Agreements with several important partners, including the United Kingdom and, most recently, the European Union. The Agreement with the EU alone will reduce tariffs on 80 to 90 percent of goods, ⑨, which will make Indian goods more attractive compared to their Chinese counterparts. This is especially relevant because in many sub-segments, the European market represents more than 30 percent of global demand for electronic goods ⑤.  

Furthermore, India's government is actively supporting the manufacturing of export goods through initiatives such as the production-linked incentives. This programme provides financial incentives to manufacturers based on incremental production, with the goal of attracting investment and expanding domestic manufacturing capacity in strategic sectors. The electronics and semiconductor sectors alone accounted for half of the US$40 billion in subsidies over five years ⑩. China’s experience shows that government support is central to establishing production clusters, a strategy that the Indian government is now actively adopting. 

Constraints and Bottlenecks 

India faces several structural obstacles in its effort to become a global electronics manufacturing hub similar to China. First, greater investments in infrastructure are needed. Limitations in transport, logistics, and energy supply continue to increase production costs and reduce competitiveness. Secondly, high levels of bureaucracy and often untransparent regulation create barriers for investors and slow down the expansion of the electronics manufacturing sector. 

Despite recent shifts in production, India’s role in global electronics manufacturing remains small ④, with a share of only around one percent in global trade. The only segment in which India holds a notable position is smartphone production, accounting for about 15 percent of global output. However, building a deeply integrated supply chain similar to China’s would require rapid expansion of the sector in the coming years. 

Furthermore, production in India is largely concentrated in the assembly of intermediate products, while domestic component manufacturing remains very limited. While China also initially relied on importing intermediate goods and re-exporting finished products, it gradually moved up the value chain, something India has yet to achieve. In higher value-added stages such as design and branding, Indian companies are almost absent. To build an electronics manufacturing base comparable to China’s, India would need to develop production clusters in most parts of the value chain, particularly in component manufacturing and in high-value-added activities such as product design.  

Conclusion and Outlook 

From a macro perspective, India has the necessary conditions to emerge as a major global electronics manufacturing hub. The escalation of U.S.–China tensions, the broader shift toward friend-shoring, and the finalisation of FTAs with the European Union and other major trading partners create a unique opportunity for India to develop an electronics manufacturing ecosystem complementary to China’s. Recent investment trends suggest that this process is already underway. Electronics manufacturers are investing heavily in assembly capacity—a necessary first step for moving up the global value chain and one that also marked the beginning of deeper value chain development in China. For many tech companies, India has already become an integral part of their supply chains and is likely to grow even more important in the years ahead.   

Sources 

① Dan Milmo, « Apple ‘aims to source all US iPhones from India’, reducing reliance on China », The Guardian, 25 April 2025. 

② Michael Enright, « China smartphone producers take on the world », Hinrich Foundation, 2025. 

③ Li et al., « Structural changes and trend evolution of China’s integration into global value chains under heterogeneous trade modes », Structural Change and Economic Dynamics, 2026. 

④ NITI Aayog, « Global value chains report », NITI Aayog, 2024. 

⑤ NITI Aayog, « Trade Watch Quarterly: July–September Q2 FY 2025–26 », NITI Aayog, 2026. 

⑥ Fortune India, « 99% mobiles sold in India are ‘Made in India’: FM on govt’s PLI push », Fortune India, 17 May 2024. 

⑦ Luo Yahan, « A Tale of Two Giants: How India’s and China’s Demographics Differ », Sixth Tone, 2023. 

⑧ International Labour Organization, « ILOSTAT data portal », International Labour Organization, n.d. 

⑨ BBC News, « India-US trade deal: Hope and uncertainty as Trump cuts tariffs », BBC News, 3 February 2026.

⑩ Franklin Templeton, « India: Production Linked Incentives (PLI) », Franklin Templeton, 2023.