Emerging markets equities India electronics

India is on the cusp of an electronics revolution. Be it mobile phones, computers, or white goods, its manufacturing base is growing rapidly, opening up attractive opportunities for equity investors in emerging markets. Visiting factories across the country, I saw proof of the progress – and of India’s potential to eventually rival China on the global electronics stage.

There are a number of reasons for the boom. A growing and increasingly wealthy population creates strong demand for electronics. At the same time, appliances are becoming even more sophisticated, necessitating more high-tech components.

Domestic authorities are supportive too. The Digital India programme, for example, aims to promote growth in both the use and manufacture of electronics, bringing technology to the masses. The government’s Production Linked Incentive (PLI) scheme, meanwhile, provides financial incentives for boosting domestic manufacturing. Industry conditions – such as availability and cost of labour – are very competitive.

India has also been a key beneficiary of the global trend to diversify supply chains and improve their resilience by reducing reliance on China – a trend amplified by the Covid pandemic and by the latest uncertainty over US tariffs. Apple, for example, now makes 15% of its iPhones in India, and is planning to increase this to 25%. A similar pattern can be seen across a wide range of tech.

All this has translated into explosive growth for India’s electronic manufacturing sector (EMS): revenues have climbed at a 50% compound annual growth rate (CAGR) in the past five years. In that time, the revenues of India’s top five listed electronic manufacturers have increased nearly eight-fold to INR480 billion (USD5.5 billion).

Of course, the rapid revenue growth has brought with it a surge in valuations for leading stocks like Dixon Technologies, which assembles smartphones for Motorola, Samsung, Xiaomi and others, and Kaynes Technology, whose specialisms include automotive components. And, despite the recent growth, India still has a long way to go to on the road to electronic supremacy: it accounts for just 2% of global electronics manufacturing, compared to China’s 47%.

I travelled to India to visit key EMS companies across North and South India to see if this growth story is still robust and sustainable. What I saw in the country’s factories helped convince me that it is – and for three key reasons.

1. Young and abundant labour force

India’s demographic edge is evident on the electronics factory floors: the workforce is overwhelmingly young. Entry-level employees earn the minimum wage, but, given the sector’s fast expansion there is scope for abundant career progression to managerial levels. The minimum wage is INR 13,000–20,000/month, which is 20-40% lower than the minimum wage of Dong Guan, a key electronic manufacturing hub in South China – giving India a competitive edge. Unlike in China a decade ago, none of the factories reported labour shortages, and most workers commute from nearby communities, minimising the need for company-provided accommodation – thus creating greater flexibility and reducing costs. Given the favourable conditions, some estimate that India’s electronics may double its employment from current 6 million to 12 million by 2027.https://economictimes.indiatimes.com/industry/cons-products/electronics/indias-electronics-sector-eyes-major-growth-with-12-million-jobs-projected-by-2027/articleshow/116736956.cms

2. Large and broad market potential

Across consumer electronics, home appliances, automotives, data centres and aerospace, the management teams I met were universally bullish over prospects for the next five years. The domestic Indian market is expanding rapidly, aided by government policy (such as the “Digital India” initiative) and rising electronics content in cars, appliances, and industrial equipment. Companies like Dixon and Kaynes are also eyeing export growth, but the opportunity within India itself is large enough to keep export ratios modest.

I witnessed an example of the scale of the opportunity when visiting a factory whose operator was about to move production to a new plant with higher automation levels and more capacity. I asked what would happen to the existing factory, and was told that they already had three new potential occupiers queueing up, despite the facilities not being the most up-to-date – a clear indication of how strong the customer demand is.

3. Shift from assembly to components and semiconductors

With the government’s next phase of PLI targeting higher value-add products, several companies are investing in upstream segments. Kaynes is ramping up its packaging chips operations (known as Outsourced Semiconductor Assembly & Test or OSAT) and its printed circuit board (PCB) manufacturing business. Dixon, meanwhile, is moving into the assembly of display modules for phone screens. These investments are capital-intensive and will take time to scale up. But they signal a structural move up the value chain for Indian EMS.

4. Rising automation levels 

While Indian plants still lag China or Taiwan in automation, the pace of catch-up is accelerating. Dixon’s new Motorola line and Xiaomi’s assembly feature significantly higher automation levels compared to legacy lines (from 20% to 50-70%). Kaynes is targeting a 20% increase in automation annually, aiming for Taiwan-level efficiency (eventually one person per line).

Within India’s EMS, three listed companies stand out for their growth potential – the already mentioned Dixon and Kaynes, plus Netweb Technologies.

Dixon remains the clear leader in India’s electronics industry, with unmatched scale (over 30 million phone shipments last year), robust export business (40% to North America), and ongoing investments in high-automation facilities. Management is focused on organic growth and cash flow generation, and sees little credible local competition outside Tata Electronics. Dixon is also extending its reach into new segments like mobile phone display screens and computer monitors, and refrigerators.

Kaynes is perhaps the best “next gen” EMS proxy, with strategic expansions into OSAT, PCB and semiconductor assembly (aided by government subsidies). While its growth plans are bold (doubling revenue by 2027), execution in the OSAT segment will be closely watched, as initial utilisation and customer ramp-up may be bumpy. The company’s focus on process quality and automation should help in the long run.

Netweb, meanwhile, is a play on India's datacentre and AI boom, thanks to its full-stack capability (hardware plus software) and deep partnerships with global tech giants such as Nvidia, Intel and AMD. With a strong order pipeline and ambitious 35-40% revenue CAGR targets, Netweb is well-positioned to benefit from data localisation and the AI wave.

Overall, my trip confirmed that Indian EMS sector’s strong financial and stock market performance is underpinned by real structural changes: a young, cost-competitive labour force, rising domestic demand and a gradual move up the value chain. The best-positioned companies — Dixon, Netweb, and Kaynes — combine scale, operational excellence, and a willingness to invest for the future. Valuations remain a challenge but any correction would offer interesting entry opportunity to participate in this structural growth area.