New Delhi: India’s low-margin electronics makers are risking their money on low-value bets once again. As the $43-billion domestic smartphone market remains stalled for five straight years, at least two contract-based electronics manufacturing services (EMS) firms have doubled down on assembling smartphones. This once again risks keeping the sector at wafer-thin profitability and minimal value addition.
On 18 June, Haryana-based Amber Enterprises signed a deal with Chinese electronics brand Oppo to assemble its smartphones locally. The same week, privately held Bhagwati Products Limited – with clients including China’s Oppo, Vivo, Realme and OnePlus – announced that it crossed ₹17,000 crore in revenue in FY26.
This is a contrast to the previous fiscal year, when India’s top electronics makers began diversifying away from mobile phones for revenue growth. There were several reasons for this attempt at diversification. For one, India’s smartphone market declined from 161 million units sold in 2021, to 152 million last year, as per data from market researchers Counterpoint and IDC India. A further 5-8% decline is projected this calendar year.
Another reason was the smartphone assembly has razor-thin margins. Data from Toffler on Bhagwati Products, which is headed by Rahul Sharma, founder of failed homegrown smartphone brand Micromax, showed its operating margin was 0.6% until FY25. Dixon Technologies, India’s largest EMS firm, reported a 3.4% margin in FY26. It earns two-thirds of its revenue from assembling smartphones.
India currently has seven homegrown pureplay EMS firms, of which four are publicly listed. The biggest is privately held Tata Electronics, which recorded steep growth by capturing Apple’s assembly volume in India. Powered by the Centre’s production-linked incentive (PLI) scheme for smartphones, Tata Electronics earned ₹66,601 crore of revenue in FY25, all of it driven by low-margin mobile assembly. Tata Electronics reported an operating margin of 3.8% in FY25. Being privately held, it has not disclosed its FY26 financials yet.
That’s not to say the sector created no value. Commerce ministry data for FY26 showed India exported $47.96 billion worth of electronics in FY26, with iPhones assembled by Tata accounting for nearly half of this. But Indian manufacturers only generate domestic value addition of around 15%, which is about 40% of what EMS firms generate in China, the world's largest electronics maker.
With the PLI scheme having expired on 31 March, and its next edition not yet announced, the markets are starting to question the industry’s phone-linked growth. Shares of Dixon Technologies have declined 21% in the past 12 months.
Stuck in a rut
Despite such downturns, Amber and Bhagwati’s bets on mobile phone assembly reveal that Indian EMS firms aren’t quite ready to move beyond smartphones just yet.
“Most of Bhagwati’s annual revenue is being driven by the mobile phone assembly ecosystem, which includes smartphones, earphones and watches. We’re also trying to ramp up assembly and manufacturing of IT and automotive electronics, but before that, we’re currently earning mostly from external clients in the mobile phone space,” said Rahul Sharma, cofounder of Bhagwati.
Harshit Kapadia, vice-president at brokerage firm Elara Capital, said most of Bhagwati’s growth has come from its joint venture with Shanghai-headquartered Huaqin, and takeovers of Vivo’s and Oppo’s in-house manufacturing operations, which were driven by the government’s local-partnership mandates.
“Most of the business that Bhagwati has won over the past two fiscal years was driven by government mandates, and all of that has been driven by smartphone assembly localization. The industry remains highly concentrated on mobile phone assembly, which contributes the largest percentage of revenue. These are long-term deals, but will deliver very low margins for at least the next two to three fiscal years, before the possibility of value addition and earning greater profits comes in,” Kapadia said.
Amber’s deal with Oppo falls into the same bracket, Kapadia added. While home appliances currently drive two-thirds of Amber's revenue, the company is investing in a printed circuit board (PCB) manufacturing plant to leverage the Centre’s Electronics Components Manufacturing Scheme (ECMS). This will allow Amber to add value to its smartphone partnership over the next two fiscal years.
After Micromax lost out to Chinese smartphone giants such as Xiaomi, Sharma is banking on a new EMS venture alongside a third business: MiPhi Semiconductor. A joint venture between the Indian entity and Taiwan’s Phison, MiPhi aims to develop indigenous intellectual property (IP) for memory chips. While Sharma noted that MiPhi already generates ₹250 crore in quarterly revenue by supplying IT hardware firms, this chip venture is still a fraction of the size of his mobile assembly business.
Hopes pinned on fresh incentives
For now, the two firms are betting on fresh incentives for smartphone assembly. Mint reported on 2 January, citing S Krishnan, secretary at electronics ministry, that the smartphone PLI scheme may make a comeback as “some industry stakeholders have reported valid challenges persisting in the electronics ecosystem, which the government is taking into account”.
Bhagwati’s Sharma, meanwhile, said the firm may target the component incentivization scheme in the coming years. “For now, our push to make memory chips is eligible for the design-linked incentive scheme, which is too small to add meaningful value for us. We’ll actively evaluate government incentives once we become eligible,” he said.