India bets $6.5bn on shifting smartphone supply chains from China

India unveiled a $6.5 billion incentive scheme on Wednesday to expand its smartphone manufacturing capabilities and draw global electronics supply chains away from China. The five-year programme, running until March 2031, offers manufacturers incentives ranging from 2.25% to 5% based on eligible sales, with additional bonuses for sourcing components locally and conducting research.

The funding marks a departure from India’s previous reliance on basic final assembly. “It is a shift from the ‘assemble more’ playbook toward ‘depth, R&D and local value capture’,” said Navkendar Singh, associate vice president at IDC. While India accounts for 18% of global smartphone production, compared to China’s 63%, it remains heavily dependent on imported parts.

The strategy is already bearing fruit with Apple, which now assembles about 25% of its iPhones in India through suppliers like Foxconn and Tata Group. “Apple stands to benefit directly,” Singh said, noting the policy gives the company greater confidence to diversify production away from China. New Delhi also recently cleared a joint venture between China’s Vivo and Indian firm Dixon Technologies, and scrapped import duties on some electronics components.

Alongside the phone scheme, India committed a further $13.3 billion to bolster domestic semiconductor manufacturing, expanding a $10 billion chip programme launched in 2021. For device makers, localising production is becoming a financial necessity. Tarun Pathak, research director at Counterpoint Research, noted that brands are looking to “save every cent” as memory prices hit record highs and a weaker Indian rupee inflates import costs.

The Indian government projects the scheme will generate $405 billion in phone production and 60,000 direct jobs. The long-term ambition is for India to capture 35% to 40% of global production, according to Pankaj Mohindroo, chairman of the India Cellular and Electronics Association. For European businesses and consumers, this deepening of India's supply chain represents a structural shift in how consumer electronics are built, gradually reducing global reliance on Chinese manufacturing hubs.

New Delhi also wants to foster homegrown mobile-phone brands, offering an extra 3% incentive for product design and research. Indian IT Minister Ashwini Vaishnaw announced the push at a media briefing, aiming to revive a domestic brand presence that has been largely eclipsed by Chinese competitors.