India’s Rise as the Second Largest Smartphone Manufacturer

India has become the most populous country in the world, with its population reaching more than 1.4 billion. Nearly one-fourth of India’s population is aged between 15–29 years, while another one-fourth falls within the 0–14 years age group. This demographic advantage makes India a well-positioned market for technology products, especially among the younger generation, which is the primary driver of demand for electronics. As a result, India’s electronics sector is experiencing significant growth supported by various government initiatives meant to position the country as a global leader. In January 2022, the government set a goal to achieve electronics production of US$ 300 billion by 2025-26, with a strong focus on improving exports of smartphone. This has helped India become the second-largest mobile phone manufacturer globally, with over 200 manufacturing facilities operating within the country. As consumer spending power increases, this offers substantial opportunities for international companies to enter the growing Indian market. 

India’s smartphone manufacturing market 

In 2014-15, India’s mobile phone domestic production met only 25% of the total domestic demand. However, over the last decade, India’s mobile phone manufacturing has grown considerably, reaching Rs. 4.1 lakh crore (US$ 49.27 billion) in FY24 from US$ 3 billion in FY15, driven by government initiatives such as the Production Linked Incentive (PLI) scheme and make in India programme. This growth has supported India to meet 97% of its domestic mobile phone demand. 

In 2018-19, domestic production equalled demand and since the introduction of the PLI scheme in March 2020, domestic production progressively increased from US$ 30 billion to US$ 49 billion in 2023-24. Also, mobile phone exports saw a growth of 91% in 2022-23 compared with exports in the previous year, placing smartphones among India’s top five exported products. As per the Ministry of Commerce, India's smartphone exports further rose by 42% in 2023-24, reaching a value of US$ 15.6 billion from US$ 11.1 billion in 2022-23 and becoming the country’s fourth-largest export item. Additionally, India emerged as the sixth largest global exporter of mobile phones in 2022. This growth aligns with the government’s ambitious electronics sector goals, highlighting the need for ongoing policy evaluation and support in this vital industry. 

Source: ICEA

Drivers of smart phone manufacturing 

• Government initiatives 
  • Production Linked Incentive Scheme (PLI): Launched in April 2020, the PLI scheme has significantly boosted mobile phone manufacturing in India through key strategies like offering financial incentives based on production levels, encouraging manufacturers to increase output and investing in local facilities. Under the scheme for smartphones, companies receive incentives one year after achieving production targets. As of now, the government has issued around Rs. 2,500 crore (US$ 300.41 million) under the scheme, with Rs. 500 crore (US$ 60.08 million) give out to Samsung for meeting targets in the first year and Rs. 2,000 crore (US$ 240.33 million) released for the three contract manufacturers of Apple and Dixon. This scheme has drawn major global smartphone companies to India, like Dixon Technologies, Foxconn, Apple and Samsung, which promotes competition and accelerates technology transfer to local workforces.  
  • Phased Manufacturing Programme (PMP): To promote the domestic production of mobile phones in May 2017, the Indian government introduced the PMP scheme. This scheme aimed to encourage large-scale production and create a strong local manufacturing ecosystem for mobile devices. The primary goal of tariffs in countries like India is to support local industries. In the electronics sector, tariffs were designed to gradually boost local production in line with the PMP. 
  • Make in India: Started in 2014, The central government’s Make in India initiative, has notably increased the shipments of domestically manufactured mobile phones, which cross 2 billion units during 2014 to 2022. A report from global research firm Counterpoint indicates that mobile phone shipments from India experienced a CAGR of 23% during this period. 
• China+1 trend

For countries seeking to reduce risk due to geopolitical tensions, supply-chain issues linked to dependence on a single country and to diversify manufacturing and supply chains beyond China, India emerges as a prominent option because of its emerging market. China+1 trend is proving beneficial for India as the country closes the gap with China in mobile phone exports. Recent trade data shows that while China and Vietnam faced export declines of 2.78% and 17.6%, respectively, in 2023-24, while India’s exports grew by over 40%. According to the International Trade Centre, in 2023-24 China’s mobile phone exports decreased by US$ 3.8 billion, while Vietnam’s exports fell US$ 5.6 billion from the previous year. However, India’s mobile phone exports gained US$ 4.5 billion in export. This data suggests that India gained nearly half of the total decline in exports from both countries.  

Source: International Trade Centre 

• Domestic demand 

Domestic demand support mobile phone manufacturing in India by leveraging a large consumer base and rising disposable incomes. Healthy domestic demand and increasing demand from the international market has rewarded manufacturers to increase production. As per ICEA, India’s domestic demand has increased from US$ 12 billion in FY14 to US$ 36 billion in FY24 at a CAGR of 13%. 

• Cost of manufacturing 

Cost-efficient labour in India significantly enhances mobile phone manufacturing by reducing production costs, allowing manufacturers to offer products at better prices. This cost-effective environment attracts both domestic and foreign investments in country, especially with government support like the PLI scheme. Additionally, it allows companies to scale up production to meet increasing demand without incurring high expenses. The sector also creates numerous jobs. As per reports, the sector has created around 5,00,000 jobs and is set to create an additional 1,50,000-2,00,000 direct and indirect jobs by FY25, thus contributing to the sector’s economic growth. 

• Global competitiveness 

India is improving its competitiveness in mobile phone manufacturing by ramping up the scale of production and actively participating in global value chains (GVCs). To enhance supply chains, it is essential to reduce tariffs on key components and sub-assemblies. The Union Budget 2024-25 outlined significant steps by lowering basic customs duty on mobile phones, PCBs and chargers from 20% to 15%, while also exempting critical minerals and inputs required for smartphone manufacturing. These measures are expected to strengthen local manufacturing and align with industry demands through simplified tariffs.  

Challenges 

Electronics exports are largely driven by global value chains (GVCs), which involve multiple stages of assembly and diverse skill requirements. To enhance production and exports, India needs a strategic medium-term approach focused on developing a robust domestic ecosystem. By encouraging the necessary skills and technological capabilities, local companies can better integrate into GVCs, thus strengthening their position. A thriving domestic ecosystem will also enable firms and global brands to scale production and exports effectively. 

India faces competition from countries like China and Vietnam, which have established themselves as global leaders in electronics exports. In 2022, electronic exports accounted for approximately 27% of China’s total exports and around 40% of Vietnam’s, compared with India’s 4.7%. This difference highlights the huge potential for India to increase its electronics exports by optimising operations in the country. By focusing on competitive production and building a supportive ecosystem, India can aim to gain a larger share of the global electronics market. 

Road ahead 

With government target of achieving US$ 300 billion in production by 2025-26, India’s electronics sector is well placed for growth. And a major contribution of this growth to be mobile phones manufacturing, which is expected to account for 40% of this output. For the first time in 2021-22, India’s mobile phone exports crossed US$ 5 billion, and reached US$ 5.8 billion, and almost doubled in next year. In 2023-24, India’s mobile phone exports increased by 42% compared to the previous year, continuing the upward trend. The export levels from 2021-22 to 2023-24, with the introduction of the PLI scheme for smartphones, have been outstanding, showing a much stronger growth push than earlier years. Additionally, India has transitioned from a situation of high imports and relatively low exports to one where exports now exceed imports each year. The government’s initiatives to enhance production and exports are essential for positioning India as a global manufacturing hub. This strategic approach not only supports domestic growth but enhances India’s competitiveness in the global electronics market.