India's transition to EMS 2.0: Focus shifts to electronic component manufacturing

India is preparing to transition into the second phase of its electronics manufacturing initiative, termed Electronics Manufacturing Services (EMS) 2.0, which will focus on the actual production of electronic components, according to a report by Phillip Capital.

This follows EMS 1.0, the first phase, which concentrated primarily on the assembly of electronic components.

The report further noted that the government is planning to introduce a new Production Linked Incentive (PLI) scheme specifically for electronic components. The goal of this scheme is to increase the value addition in the sector from the current 18-20 per cent to 35-40 per cent.

"In the first phase of India's electronics manufacturing push, or EMS 1.0, is mainly for assembling electronic components, while the second phase, or EMS 2.0, will mainly deal with the actual manufacturing of electronic components," the report stated.

Once implemented, this PLI scheme will support long-term value creation, making India a more competitive hub for electronics manufacturing. The shift to EMS 2.0 will prioritize the production of locally sourced components, reducing dependence on imports, which are often affected by tariffs and other challenges.

Despite significant progress in assembling electronic products, especially in the mobile and consumer electronics sectors, India still faces heavy reliance on imports for component manufacturing and design. EMS 2.0 will address this gap, focusing on strengthening component production.

To support this transition, the government had previously launched the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), which offers a 25 per cent upfront capex incentive to encourage investment in component manufacturing.

However, as both the PLI for Large-Scale Electronics Manufacturing and the SPECS scheme approach their conclusion by FY26, the need for a new subsidy scheme focusing on electronic components has become critical.

This new scheme is seen as an essential step in the evolution from EMS 1.0 to EMS 2.0, with a clear focus on component manufacturing. This shift aligns with India's ambition to become a global leader in electronics manufacturing.