A Historic Reversal in Trade Flows
For years, the flow of electronic components between India and China followed a predictable pattern. Indian factories imported sophisticated parts from Chinese suppliers, assembled finished devices, and shipped them to global markets. That single direction flow has suddenly become a bidirectional route. In the current fiscal year, Indian vendors supplying to Apple have exported a record $2.5 billion worth of components and sub-assemblies to China, with projections indicating this could reach $3.5 billion by year end. This marks a dramatic jump from just $920 million in fiscal year 2025 and almost negligible levels in prior years.
The surge represents more than a statistical anomaly. It signals a structural shift in how global electronics supply chains operate. Indian facilities are now sending critical inputs such as printed circuit board assemblies, mechanical housings, flexible PCBAs, and conductive graphite buttons back to China. These components feed directly into production lines that assemble devices for the world’s largest consumer electronics company. The development challenges long held assumptions about India’s role in global manufacturing. Previously seen as a final assembly point for finished goods, the country is now participating deeper in global value chains. As one industry executive familiar with the supply chain dynamics observed, this level of export growth was unthinkable when Apple first began shifting iPhone production from China to India in 2021. The transformation highlights how quickly manufacturing capabilities can evolve when policy incentives align with corporate strategy and investment flows target technological upgrading rather than simple labor arbitrage.
From Final Assembly to Component Manufacturing
To grasp the significance of this reversal, one must understand the limitations of India’s previous manufacturing model. For over a decade, the country’s electronics growth relied heavily on final assembly. While the Production Linked Incentive scheme successfully attracted global brands and scaled up smartphone output, it masked a persistent vulnerability. Domestic value addition remained stuck at roughly 15 to 20 percent because manufacturers imported most components, materials, and sub-assemblies, primarily from China.
This dependency created risks. Supply chains remained exposed to geopolitical disruptions and logistical bottlenecks. Much of the economic value from India’s manufacturing activity accrued elsewhere. The Electronics Component Manufacturing Scheme, launched in 2025, was designed to address precisely this gap. By incentivizing domestic production of components, materials, and manufacturing equipment, the initiative aims to transform India from an assembly hub into a fully integrated manufacturing ecosystem.
Components represent the core of value creation in electronics manufacturing. Items such as circuit boards, display modules, connectors, and battery cells account for a substantial share of total product value. Control over these inputs determines cost efficiency, technological capability, and resilience. The expansion of component manufacturing under ECMS reflects this reality. Approved projects span multiple segments, from consumer electronics to automotive and strategic sectors. By anchoring production of critical inputs within the country, India reduces import dependence while shortening supply chains.
The Apple Ecosystem Driving Change
Several major suppliers have driven the export surge to China. Companies including Foxconn, Tata Electronics, Tata owned Pegatron Technology India, Motherson Group, Salcomp, TRIL Bangalore, and Yuzhan Technology have all contributed to shipments. These firms manufacture mechanical enclosures from scratch, including casings for iPhones and other Apple devices. The components exported fall under three harmonized system nomenclature codes and have gathered momentum since April 2025.
The geographic reach of India’s component exports extends beyond China. Suppliers have also begun shipping parts to Vietnam, another key hub in Apple’s manufacturing network. This multi directional flow indicates that India is positioning itself as a central node in Asian electronics supply chains rather than a peripheral assembly point. The development aligns with Apple’s broader strategy to reduce reliance on any single country while expanding local value addition in multiple manufacturing locations.
Former NITI Aayog CEO Amitabh Kant highlighted the policy success behind this shift, noting that the development exceeded early projections.
“The Apple ecosystem has started exporting components and sub-assemblies to China. This was unimaginable when the Smartphone PLI scheme was first conceptualised.”
Under the smartphone PLI program, Apple has manufactured iPhones worth $70 billion in India over five years, with exports accounting for $51 billion, or nearly 73 percent of the total. India has become the world’s second largest mobile phone manufacturer and recently overtook China as the top smartphone exporter to the United States.
Policy Framework and Strategic Incentives
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 middle layer allows the system to function as an integrated ecosystem rather than isolated initiatives.
The government has approved seven projects under ECMS, providing grants worth 55.32 billion rupees ($626 million). These projects will help establish local manufacturing of camera modules, multi layered printed circuit boards, and advanced high density PCBs used in smartphones, wearable devices, and medical equipment. Minister for Electronics and IT Ashwini Vaishnaw outlined the domestic impact of the new capacity.
“20% of our domestic demand of PCBs and 15% of Camera Module sub-assembly will be met through production from these [seven] plants, with about 60% of total production from these plants being exported.”
Industry projections suggest India’s electronics components market could reach $150 billion by 2030, with the overall electronics market scaling to $500 billion. Achieving this will require sustained investment in skills and technology. Component manufacturing demands expertise in materials science, precision engineering, process control, and automation. The expansion creates tens of thousands of direct jobs requiring higher technical proficiency, building foundations for advanced design and research activities.
Navigating Global Trade Tensions
The timing of India’s manufacturing rise coincides with escalating trade tensions between the United States and China. US President Donald Trump has imposed tariffs of 125 percent on Chinese goods, prompting a scramble among suppliers to diversify production locations. Chinese electronics component makers are now offering price reductions of up to 5 percent to Indian companies during contract negotiations, driven by concerns over reduced American demand and surplus inventory.
This trade environment has accelerated the China Plus One strategy, where global firms seek alternative manufacturing bases to reduce geopolitical risk. India has capitalized on this shift. In the quarter ended September 2025, India overtook China to become the top smartphone exporter to the United States, fulfilling approximately 40 percent of American demand previously supplied by Chinese manufacturers. US imports of smartphones from India increased by roughly $15 billion while imports from China declined by around $18 billion.
Despite these advances, the relationship remains complex. China continues to dominate global electronics exports, accounting for nearly a third of the worldwide total. India still imports heavily from China, with electronics imports reaching $116 billion in fiscal year 2026 compared to $48 billion in exports. Chinese suppliers provide approximately 75 percent of the electronic components used in Indian manufacturing. This persistent trade gap underscores that while export capabilities are growing, India remains dependent on Chinese inputs for its own production lines.
Challenges on the Path to Self Reliance
The road to manufacturing independence remains long. While the $2.5 billion in component exports to China represents a significant milestone, it pales in comparison to the $36.8 billion in electronic components India imported in fiscal year 2025, with nearly 40 percent originating from China and over 16 percent from Hong Kong. The $116 billion total electronics import bill for fiscal year 2026 highlights the continued dependence on foreign technology.
Quality control orders requiring Bureau of Indian Standards approval for overseas sourcing, combined with increasing import duties on components, have promoted local manufacturing. Yet the transition requires time. The seven approved ECMS projects represent just the beginning of a broader effort to build a domestic component ecosystem. The Electronics Component Manufacturing Scheme has received 249 applications from local and global companies committing investment of 1.15 trillion rupees (nearly $14 billion) in proposed investments, indicating strong private sector interest in deepening India’s manufacturing capabilities.
The competitive landscape is also shifting. As Indian component manufacturers scale up, they face pricing pressure from established Chinese suppliers desperate to maintain market share amid tariff induced demand destruction. Indian manufacturers must balance the opportunity to source cheaper inputs against the strategic goal of building domestic capabilities. The next phase of growth depends on whether India can replicate its smartphone assembly success in higher value, more complex component categories such as semiconductors and advanced displays.
Key Points
- Indian vendors exported $2.5 billion in Apple components to China in fiscal year 2026, with projections to reach $3.5 billion by year end, up from $920 million in FY25
- Major suppliers including Foxconn, Tata Electronics, and Pegatron are shipping printed circuit board assemblies, mechanical parts, and enclosures to Chinese factories and to Vietnam
- The surge follows the Production Linked Incentive scheme and Electronics Component Manufacturing Scheme, designed to increase domestic value addition from 20 percent toward 35 to 40 percent
- India overtook China as the top smartphone exporter to the US in late 2025, meeting approximately 40 percent of American demand previously filled by Chinese manufacturers
- Despite export growth, India imported $116 billion in electronics in FY26 compared to $48 billion in exports, with roughly 75 percent of components still sourced from China
- Chinese suppliers are offering discounts of up to 5 percent to Indian manufacturers amid trade war pressures and reduced US demand for Chinese goods
