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India’s ambitions of emerging as a global electronics manufacturing powerhouse have faced critical headwinds in recent months, exposing both structural weaknesses and technological vulnerabilities. Despite consistent growth in exports and substantial policy backing, the recent withdrawals of high-profile semiconductor projects have underlined the steep climb India must make to reach self-reliance and global competitiveness in the electronics sector.

The most visible blows came from the exits of major private players in 2025. The Adani Group’s decision to pause its much-publicized $10 billion semiconductor fabrication partnership with Israel’s Tower Semiconductor sent shockwaves across the industry. Around the same time, Zoho shelved its $700 million chip manufacturing project, attributing the failure to difficulties in finding a viable technology partner for complex fabrication needs. These developments dealt a severe reputational and strategic setback to India’s semiconductor aspirations—an area that had recently gained traction as a geopolitical and economic priority.

The roots of the problem run deep. India’s heavy dependence on imports continues to plague the sector. Over 80% of electronics components—ranging from semiconductors and printed circuit boards to advanced displays and lithium-ion batteries—are sourced from foreign suppliers, primarily China. This dependence not only inflates India’s electronics trade deficit, which crossed $100 billion in FY25, but also weakens national resilience in critical sectors like defense, EVs, and communication.

Additionally, India’s manufacturing cost structure remains a deterrent to global competitiveness. Indian firms face input and energy costs 10–20% higher than their counterparts in China, Vietnam, or Mexico, making it difficult to scale cost-sensitive products such as smartphones or consumer electronics. This cost disadvantage is compounded by persistent logistical hurdles, power supply inconsistencies, and policy execution lags.

Technologically, the gap is more glaring. India has yet to develop domestic foundries capable of producing next-generation chips like 5nm or 3nm. While global players are moving towards AI-integrated and edge computing chips, India still lacks the fabrication base for even legacy nodes in large volumes. This absence of deep-tech infrastructure, combined with relatively weak investment in electronics R&D, has hampered India’s ability to climb up the value chain.

Supply chain vulnerabilities have further exposed the fragility of the ecosystem. Geopolitical disruptions, such as those involving rare earth material curbs, and bureaucratic red tape in import clearances have caused ripple effects in pricing and production cycles. The industry was recently hit by import curbs on key gold compounds used in semiconductors, triggering panic about supply reliability among downstream manufacturers.

Yet, amidst these challenges, India is not standing still. The government has rolled out several ambitious interventions to counter these bottlenecks. The Production Linked Incentive (PLI) scheme and the SPECS (Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors) are offering targeted subsidies and tax benefits to catalyze domestic investment. One significant breakthrough was the announcement of India’s first commercial semiconductor fab in Dholera, Gujarat, being developed by Tata Electronics under the India Semiconductor Mission. The project, while not entirely filling the vacuum left by Adani and Zoho, signals a renewed push for foundational capacity-building.

At the same time, India’s Electronics Manufacturing Services (EMS) sector has shown resilience. In FY25, EMS order bookings grew by 23%, driven by strong global demand, government incentives, and the rapid growth of electric vehicles and clean energy applications. Companies are increasingly venturing into high-value segments such as aerospace, medical electronics, and industrial automation—a positive shift from traditional assembly-line operations.

These contrasting realities—the pain of strategic setbacks and the momentum of structural evolution—highlight a transition phase for Indian electronics manufacturing. For India to truly succeed, more than just fiscal incentives are needed. The country must develop a long-term strategy focused on innovation, global partnerships, infrastructure development, and workforce skill enhancement.

Without addressing the foundational issues—import dependence, cost inefficiencies, and deep-tech shortages—India’s dream of becoming a global electronics hub risks being more aspirational than achievable. But with policy realignment, timely execution, and sector-specific collaboration, there is still time to course-correct and build an ecosystem that is not just ‘Make in India,’ but ‘Innovate in India.’#ElectronicsManufacturing
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