MUMBAI: India’s listed electronics manufacturers are under pressure to defend profitability as the mobile-phone assembly boom slows, prompting a shift towards higher-value industrial electronics.
Investors remained jittery through the last fiscal, driven by concerns that slowing consumer sentiment could weigh on the rapid growth that electronics manufacturing services (EMS) firms have delivered so far.
In an interview with Mint, Jasbir Singh Gujral, managing director of Syrma SGS Technology Ltd, India’s second-largest listed EMS firm, said, “We’re increasingly looking to capture a larger chunk of contracts from defence, aerospace and med-tech verticals, all of which represent opportunities for original design manufacturing, and also bring significantly higher margins. We’ve already started this transition, and we plan to do more of it this fiscal.”
Beyond mobile phones and laptops, EMS firms are expanding into smart metres for electricity boards, aerospace and defence subsystems, railway safety instrumentation, printed circuit boards and display assemblies, and medical devices deployed in hospitals.
India’s annual mobile phone shipments have remained subdued since the covid-19 pandemic, with industry estimates pointing to a single-digit decline this calendar year from 152 million smartphones shipped last year.
Building pressure
The margin pressure driving this shift is increasingly visible.
In FY26, Syrma SGS reported an operating margin of 7.1%, up 2.3 percentage points. Consumer electronics, which represented 30% or the largest chunk of Syrma’s revenue of ₹4,819 crore, recorded the slowest growth across segments at 8% year-on-year. Automobiles, healthcare, industrial electronics and railways grew 39%, 36%, 30% and 74%, respectively.
Low-end mobile assembly typically generates operating margins of 2-3% because of the scale-driven nature of the business, while specialized defence and industrial electronics can deliver margins of 15-20%, driven by higher design and component complexity.
A second way to increase margins, Gujral said, is by increasing exports “from just under a quarter now to about one-third of our revenue in the near term—that is our goal.”
The same margin pressure is visible at larger peer Dixon Technologies, India’s biggest listed EMS company.
In FY26, the company reported an operating margin of 2.1%, down 10 basis points. Over 70% of Dixon’s revenue of ₹48,873 crore comes from mobile phone manufacturing, a segment that saw a significant demand slowdown through the last fiscal. Home appliances, televisions and refrigerators contributed ₹4,318 crore or 9% of top line, declining 13% year-on-year.
Saurabh Gupta, director and group chief financial officer, Dixon Technologies (India), told Mint the company is redirecting resources towards higher-margin electronics opportunities.
“Though a new smartphone incentive plan has not come yet, we’re pretty confident of seeing one from the Centre soon, and we expect it to focus on exports. At Dixon, we too are doubling down on high-margin business areas, and we’ve recently hired a specialist in this field to lead our efforts to ramp-up our margins. This will be a core focus for us in this fiscal, alongside getting the most value out of our display and camera module manufacturing facilities that will further help us increase margins,” Gupta said.
Beyond smartphones
The shift is now visible across companies, as exposure to smartphones and consumer electronics increasingly gives way to industrial and specialized electronics. The impact of this repositioning is already visible in companies leaning more heavily into high-value electronics.
Kaynes Technology Ltd, despite missing investor expectations on revenue and cash flow guidance, reported ₹3,626 crore in revenue. Industrial electronics accounted for 55% of its top line, and the company reported an operating margin of 10%, down 80 basis points over FY25.
In a post-earnings call with analysts, Muthukumar Narayanaswamy, managing director of Kaynes Technology, sought to reassure investors that the company “still has the highest operating margin among competitors due to a clear focus on high-value industrial electronics segments, which Kaynes will look to scale up through this fiscal.”
Analysts say this reallocation of focus is now central to the sector’s next phase of growth.
“EMS firms have all so far grown on the volume game, which helped them scale up revenue rapidly and gain margins thanks to government incentives. Now, with the next tranche of incentives unclear as yet, the electronics makers will have to invest in high-value, low-volume areas such as defence, healthcare and other specialized industries,” said Harshit Kapadia, vice-president at brokerage firm, Elara Capital.
Nuvama Institutional Equities in a 13 May note said that EMS companies such as Dixon are increasingly focusing on “new micro-verticals for growth that can incrementally add revenue going forward.”
Elara’s Kapadia said exports and niche projects will determine whether the sector retains investor interest through FY27. “At the end of the day, it will all depend on if the companies can ramp-up exports, and increase component manufacturing as well. This, coupled with moving away from the low-margin business areas to focus on high-margin industrial electronics, will be key,” he said.