US tariffs: India's tech hardware sector likely to gain over China, Vietnam

India's electronics manufacturing, especially smartphones, are set to gain a competitive edge as the US imposes tariffs on electronics imports from key countries, says a CLSA report.

The shift in the global supply chain could favour India, particularly in the smartphone manufacturing segment, it added.

Smartphones account for $51 billion worth of imports for the US, with China, Vietnam and India being key sources, according to the global broakrage.

Apple and Samsung already have robust manufacturing operations in India.

India's lower tariff, combined with its large domestic market and increasing backward integration supported by the production-linked incentive (PLI) scheme, enhances its cost competitiveness.

Dixon Technologies is likely to be a key beneficiary of this shift in the global supply chain dynamics.

While Apple and Samsung's assembly operations are either in-house or with companies not listed in India, Dixon's role in the supply chain is expected to grow, said CLSA.

According to other reports, the expected direct impact of US reciprocal tariffs would vary in nature for the sectors in India. The impact is expected to be largely neutral for electronics, textiles, agricultural products, chemicals, and automobiles and parts.

In electronics, higher reciprocal tariffs on China would mean a neutral impact for India's electronics exports, said the report by CareEdge Ratings.

Meanwhile, the recently-announced Rs 22,919 crore Electronics Component Manufacturing Scheme (ECMS), which has the potential to generate nearly 1 lakh direct jobs and several indirect jobs, focuses on the local production of sub-assemblies and bare components like inductors, resistors, PCBs and capacitors, etc.

The scheme envisages to attract investment of Rs 59,350 crore, result in production of Rs 4,56,500 crore and generate additional direct employment of 91,600 people and many indirect jobs as well during its tenure.

There has been five times increase in production over 10 years (17 per cent CAGR) to reach Rs 9.5 lakh crore in 2024, while 25 lakh jobs have been generated.

There has also been six times increase in exports (43 per cent CAGR) to Rs 2.4 lakh crore in 2024. Electronics items are now among India's top three export items.