Budget 2026: India's Rs 40,000 Crore Electronics Overhaul

A Strategic Pivot in Manufacturing

The Union Budget 2026 marks a significant strategic shift for India's electronics sector, moving decisively from an assembly-led growth model to fostering a comprehensive, full-stack manufacturing ecosystem. The government has introduced robust policy measures and fiscal support aimed at localising the production of critical components, semiconductor equipment, and materials, signaling a clear ambition to build a self-reliant and globally competitive industry.

Key Budget Announcements

At the core of this new strategy is the launch of the India Semiconductor Mission 2.0 (ISM 2.0). This initiative builds on its predecessor by expanding the focus beyond just chip fabrication to include the development of a complete value chain, encompassing equipment manufacturing, raw materials, and indigenous intellectual property.

To support this vision, the outlay for the Electronics Components Manufacturing Scheme (ECMS) has been nearly doubled to Rs. 40,000 crore. This substantial increase is designed to incentivise the domestic production of components like Printed Circuit Boards (PCBs), camera modules, and display panels. Further reinforcing this commitment, government spending on semiconductors is set to rise to Rs. 8,000 crore in FY27, up from Rs. 4,300 crore, while the Ministry of Electronics and Information Technology (MeitY) allocation has been increased to Rs. 21,633 crore. Additionally, a reduction in the Basic Customs Duty (BCD) on mobile phones, PCBAs, and chargers from 20% to 15% aims to improve cost competitiveness and encourage deeper domestic value addition.

From Assembly Lines to Deep Manufacturing

For years, India's electronics success story was measured in production volume, with mobile phone manufacturing scaling nearly 30 times to reach Rs. 5.45 lakh crore in FY25. However, domestic value addition remained low, hovering between 18% and 25%. This 'assembly paradox'—high volume without corresponding value capture—created a low-margin industry vulnerable to shifts in global supply chains.

Budget 2026 directly addresses this gap. By incentivising component and semiconductor manufacturing, the government aims to increase the local content in electronic goods, reduce import dependency, and build a more resilient industrial base. The goal is to transition from being an 'Assembled in India' hub to a genuine 'Made in India' powerhouse, where design, fabrication, and innovation occur domestically.

Industry Momentum and Key Beneficiaries

The policy push is already translating into on-ground action. Cumulative investment commitments under the ECMS have reached approximately Rs. 54,500 crore, targeting a wide range of advanced components. Several listed companies are positioned as early beneficiaries of this strategic shift.

• Kaynes Technology has secured approvals for multi-layer & HDI PCBs, camera modules, and copper-clad laminates, positioning it strongly in the backend semiconductor and high-value EMS space.
• Amber Enterprises, through its subsidiaries, has received approvals for multilayer and HDI PCBs, enhancing its backward integration capabilities. A new 10% import duty on certain AC components also supports its business.
• Syrma SGS Technology has approvals for multi-layer PCBs and camera modules, with potential for further growth pending approvals in other advanced component categories.
• Dixon Technologies has gained approvals for camera modules and optical transceivers, with more component categories under evaluation.

The Semiconductor Push Takes Centre Stage

Parallel to component manufacturing, large-scale semiconductor projects are advancing from construction to commissioning. Ten major manufacturing and packaging projects have been approved, representing a total investment of around Rs. 1.6 lakh crore. These initiatives are critical to establishing India as a serious player in the global semiconductor landscape.

Market Reaction and Future Outlook

The market has responded positively to the budget announcements, with shares of leading EMS companies registering gains. Industry leaders have welcomed the government's focus on building a sustainable ecosystem. Arijeet Talapatra, CEO of TECNO India, noted that the focus on semiconductors and stronger supply chains provides the industry with what it needs to build long-term value. Similarly, Avneet Singh Marwah of SPPL highlighted the importance of execution and deeper component localisation for global competitiveness.

While the policy direction is clear, experts caution that execution will be key. Challenges such as high logistics costs, the need for skilled talent, and ensuring timely incentive disbursements remain. The government's ability to address these 'disability costs' and foster a dense network of suppliers, R&D centres, and training institutions will determine the long-term success of this ambitious manufacturing overhaul.

Conclusion

Budget 2026 represents a pivotal moment for India's industrial policy. By allocating significant capital and creating a supportive policy framework, the government is laying the groundwork for a robust and self-sufficient electronics and semiconductor industry. The focus has shifted from short-term assembly gains to the long-term strategic goal of deep manufacturing. If successfully implemented, these initiatives could transform India into a global hub for high-value electronics, driving economic growth, creating skilled jobs, and securing its position in the global technology supply chain.