Paying for Depth, Not Volume: Can India Make the Parts as Well as the Phone?

The Assembly Reality: Subsidising Box-Packing While Importing High-Value Bill of Materials

Swarajya published on 9 September 2026 (updated 1 October) a commentary by Raghavan S Rao on the Electronics Components Manufacturing Scheme, or ECMS, titled to describe it as the successor to the production-linked incentive scheme that pays for depth instead of volume. It is commentary, and the author's argument is separate from the facts and estimates he cites.

The argument: India has subsidised the assembly of finished phones, but the high-value components inside them, such as bare circuit boards, passive components and camera and display modules, are still mostly imported. The author argues that the ECMS and the Mobile Phone Manufacturing Scheme, or MPMS, shift support toward components and domestic sourcing. He also argues that qualification by large buyers, which no scheme pays for, remains a gap.

Over the past decade, India successfully eradicated its reliance on imported completely built units (CBUs). Imported handsets accounted for approximately three-quarters of the domestic market in 2014-15; today they constitute less than 1%. However, assembling completely knocked-down (CKD) or semi-knocked-down (SKD) kits inside cleanrooms captures only the final mechanical and testing layer of consumer technology manufacturing.

Hard Figures and Value Capture: The 15-20% Domestic Addition Barrier

Facts and estimates cited: • Imported handsets were about three-quarters of the Indian market in 2014-15 and now account for almost none. • Local value addition in Indian phones is 15 to 20% according to Vinod Sharma of the Confederation of Indian Industry (April 2026), against a 35 to 40% industry target for 2030. Pankaj Mohindroo of the Indian Cellular and Electronics Association put it at 18 to 20%, versus 38 to 40% for China. The two bodies' ranges overlap but differ slightly. • Roughly 60 to 70% of a device's bill of materials is still imported. • Ajay Srivastava of GTRI estimated that assembly in India or China earns about US$30 of a roughly US$1,000 phone, with about US$450 going to Apple, US$150 to Taiwan, US$90 to South Korea and US$85 to Japan. This is an estimate and a rough illustration. • Rubix Data Sciences estimated India's cost disability at 14 to 18% for components and 10 to 14% for assembly. • The PLI disbursed Rs 28,748 crore across 14 sectors by December 2025, against cumulative sales of about Rs 20.41 lakh crore. • The ECMS was approved on 28 March 2025 and notified on 8 April 2025. Its outlay was raised from Rs 22,919 crore to Rs 40,000 crore in the 2026-27 Budget, and it runs to FY2031-32. The main application window closed on 30 September 2025 with 249 applications proposing Rs 1,15,351 crore against a target of Rs 59,350 crore. By August 2026, it had approved 106 projects with Rs 69,548 crore of expected investment and 74,628 direct jobs. • The MPMS replaced the smartphone PLI in July 2026, paying assemblers 2.25 to 5% of eligible sales, plus up to 1.5% more for domestic sourcing. Together MPMS and ECMS commit Rs 1.02 lakh crore.

“Assembly puts India on the phone's label; components put India in the phone's value.”

Five Strategic Takeaways on Deepening Industrial Value: Our Analysis

1. The value-capture picture is humbling: If assembly earns about US$30 on a US$1,000 phone, as one estimate suggests, then volume alone yields little. The money is in design, components and brand. That is the author's central point and a fair one, though the estimate is rough.

2. Demand for subsidy exceeded the plan: Applications proposing Rs 1.15 lakh crore against a Rs 59,350 crore target suggest strong investor interest. Approved projects at Rs 69,548 crore are above the target. Proposed investment is not made investment; we do not know how much has been spent.

3. Cost disadvantage is real: If Indian components cost 14 to 18% more, subsidy narrows the gap but does not close it. Longer-term competitiveness requires scale, supply-chain clustering and logistics efficiency.

4. Qualification is the quiet barrier: A small supplier can make a good part but be rejected for lack of documented quality processes, test records or financial strength. The author notes that no scheme pays for this.

5. Targets need defining: A 35 to 40% value-addition target depends on how value addition is measured; the three bodies cited use different numbers.

The Industrial Transition From PLI to ECMS and MPMS Architecture

The transition from the volume-focused PLI to the depth-oriented ECMS and MPMS schemes represents an explicit policy correction. Under the original smartphone PLI, an assembler received incentives purely on incremental gross sales value, irrespective of whether the sub-assemblies inside the device were flown in from Shenzhen, Taipei, or manufactured in Tamil Nadu.

Under MPMS, the incentive rate of 2.25% to 5.0% is conditioned on strict domestic sourcing tiers, with an additional 1.5% bonus payment tied directly to local procurement of high-value passive components, multi-layer PCBs, and camera modules. Furthermore, expanding the ECMS budget to Rs 40,000 crore directly subsidizes capital expenditures for high-precision component fabrication. However, bridging a 14% to 18% cost disability requires continuous power, duty-free capital equipment imports, and local chemical refining infrastructure that fiscal subsidies cannot replace.

A Supplier's Qualification Playbook and Methodological Caveats

What it means for a small manufacturer: If you make plastic parts, metal enclosures, cables, packaging or simple electronic sub-assemblies, there is a path to supply the assemblers. The path runs through certification, process control and consistent delivery. Larger component makers approved under the scheme will also need local sub-suppliers.

A supplier's readiness checklist: our template Do you have a documented quality system? Can you trace materials by batch? Do you test every lot? Can you meet a delivery schedule for a year? Are your finances strong enough to bear a long payment cycle? What tooling investment will be needed, and who pays? If you can answer yes with evidence, approach buyers.

Caveats: We rely on commentary. The estimates attributed to industry bodies are their own, and the Swarajya piece describes them without full methods. Projects approved are not production. Tracking commercial execution, actual factory commissioning, and verified domestic value-addition audits over the coming three fiscal years will determine whether this policy pivot succeeds.