Beyond Contract Manufacturing: Building India's National Electronics Capability

A Quiet Shift in India's Electronics Industry

A subtle but significant shift is taking place in India's electronics industry.

Over the past few months, Indian electronics manufacturers have increasingly forged partnerships with companies from Japan, South Korea and Taiwan. These collaborations are bringing advanced product designs, manufacturing technologies and, in some cases, established component supply chains into India, while Indian firms contribute manufacturing scale, local execution capabilities and integration into domestic and global markets.

At the same time, India's leading electronics manufacturing services (EMS) companies are expanding beyond their traditional focus on consumer electronics. Industrial, medical, defence, railway, automotive, and enterprise electronics are increasingly becoming part of their growth strategies.

Perhaps the clearest illustration of this shift comes from Bhagwati Products Ltd. The company, whose revenue jumped nearly three-fold to ₹17,000 crore in FY26, is looking to expand into IT hardware, which it sees as a major near-term growth opportunity. The company is also targeting the automotive electronics segment. The company's co-founder Rahul Sharma (who is also the co-founder of Micromax) said that the company's goal is to build India's leading electronics design platform by moving beyond assembly by investing in design, engineering, components and advanced manufacturing capabilities.

This ambition suggests that India's electronics industry is thinking beyond assembly and contract manufacturing towards broader technological capability.

Taken together, these developments point to something much larger than the expansion of a single industry. They signal the emergence of a new national capability.

The next phase of India's electronics story will not be defined simply by how many devices it manufactures. It will be defined by whether India succeeds in building a comprehensive electronics ecosystem.

Looking Beyond Smartphones

For much of the past decade, India's electronics story has been synonymous with smartphones.

That phase was indispensable. Smartphone manufacturing created production scale, integrated India into global supply chains, generated employment and attracted large investments.

However, higher memory chip and component costs, changing consumer demand, and slower smartphone replacement cycles are placing pressure on traditional consumer electronics businesses. 

Rather than viewing this solely as a challenge, Indian electronics companies have an opportunity to diversify horizontally into higher-value segments like:

- industrial electronics

- commercial and enterprise electronics

- medical electronics

- defence and aerospace electronics

- railway electronics

- automotive and EV electronics

- energy and smart-grid electronics

- data-centre and AI hardware

Many companies have already begun taking this path.

Instead of remaining dependent on one product category, they are gradually building capabilities that serve multiple sectors of the economy.

Electronics Is Becoming Infrastructure

Most people still think of electronics as consumer products like:

phones,

televisions,

laptops,

home appliances.

Increasingly, however, electronics is becoming something much more fundamental.

Factories are becoming electronically controlled.

Hospitals increasingly depend on sophisticated diagnostic and monitoring systems.

Power grids rely on smart meters, sensors and power electronics.

Warehouses use automation and machine vision.

Agriculture is becoming sensor-driven.

Transport systems depend upon electronic signalling, communications and control.

Data centres operate through layers of sophisticated electronic equipment.

Electronics is therefore evolving from a consumer industry into dynamic distributed infrastructure. Every improvement in sensors, controllers, embedded systems or power electronics improves the productivity of thousands of factories, hospitals, farms, utilities, logistics networks and public institutions simultaneously.

Its value is not confined to the electronics sector.

It continuously raises productivity across the entire economy.

From Manufacturing to Capability

Contract manufacturing has become one of India's major industrial strengths.

The model is straightforward.

Global companies increasingly bring:

- product designs

- engineering know-how

- manufacturing technologies

- quality systems

- component ecosystems

Indian companies contribute:

- manufacturing scale

- production efficiency

- workforce

- local supply-chain integration

- market proximity

This has proven to be an effective pathway into global electronics manufacturing.

However, contract manufacturing should be viewed as the beginning of capability building rather than its destination.

The long-term progression should look something like this:

Assembly

↓

Contract Manufacturing

↓

Engineering Support

↓

Co-development

↓

Product Design

↓

Electronics Design Platforms

↓

Technology Leadership

Each stage builds upon the previous one.

Manufacturing develops production discipline.

Engineering deepens technical capability.

Co-development creates architectural understanding.

Design creates technological agency.

This evolution is becoming visible in India's electronics industry's ambitions. 

Building a National Electronics Ecosystem

Electronics should no longer be viewed simply as a manufacturing industry.

It should be viewed as an ecosystem.

That ecosystem begins upstream with:

- critical minerals

- speciality materials

- electronic components

- semiconductors

- printed circuit boards

- sensors

It extends through core capabilities:

- manufacturing

- testing

- design

- embedded software

- R&D

- systems engineering

It continues downstream into:

- finance

- leasing

- insurance

- installation

- system integration

- maintenance

- upgrades

- refurbishment

And finally, it returns through a circular economy comprising:

- e-waste collection

- dismantling

- materials recovery

- component reuse

- critical mineral recycling

Only when these layers reinforce one another does an electronics industry mature into an electronics ecosystem.

The Service Layer of Electronics

The next opportunity extends well beyond manufacturing.

Traditionally, electronics companies sold products.

Increasingly, particularly in industrial and commercial markets, they can sell lifecycle solutions.

Instead of ending the relationship once equipment leaves the factory, companies can provide integrated contracts covering:

Design (where applicable)

↓

Supply

↓

Installation

↓

System Integration

↓

Maintenance

↓

Upgrades

↓

Cybersecurity and Firmware Updates

↓

Repair

↓

Refurbishment

↓

Recovery and Recycling

Such "supply-install-maintain-upgrade" models would resemble the long-term service contracts increasingly seen in other infrastructure sectors.

For customers, they offer predictable costs, higher reliability, guaranteed uptime and continual technological modernization.

For manufacturers, they generate recurring revenues instead of one-time sales.

More importantly, they create an entirely new service economy around electronics.

Electronics Ecosystem Creates Employment Across the Skills Pyramid

One of electronics' greatest strengths is the diversity of employment it creates.

At the top are:

- electronics designers

- chip engineers

- embedded software developers

- systems architects

- AI integration specialists

Alongside them are:

- production engineers

- testing specialists

- robotics technicians

- quality professionals

Further down the skills pyramid are:

- SMT operators

- assembly technicians

- maintenance personnel

- machine operators

- warehouse workers

The service layer creates additional distributed employment through:

- field engineers

- installation teams

- maintenance technicians

- calibration specialists

- cybersecurity professionals

- refurbishment centres

- recycling facilities

Unlike many advanced industries that employ relatively few people, electronics combines high-value engineering with large-scale technical, manufacturing and service employment.

Electronic Infrastructure and Industry 4.0/5.0

Much of the discussion around Industry 4.0/5.0 focuses on green energy, AI, automation, and digital systems.

Yet these technologies depend upon a deeper industrial stack:

Energy Generation

↓

Electrical Infrastructure

↓

Electronic Infrastructure

↓

Digital Infrastructure

↓

Artificial Intelligence

↓

Intelligent Industry

Electrical infrastructure delivers power.

Electronic infrastructure determines how that power is sensed, controlled, communicated and transformed into intelligent industrial activity.

AI cannot bypass this layer.

Without sensors, controllers, embedded systems, communication hardware and power electronics, AI remains largely observational rather than operational.

In other words, electronics is the productive nervous system of Industry 4.0/5.0.

Strategic Resilience

As India expands electronics manufacturing, policy should pursue multiple objectives simultaneously.

First, international partnerships should continue to be encouraged because they accelerate capability building.

Second, policy-makers should avoid excessive dependence on any single country for components, technologies or critical inputs by diversifying partnerships and supply chains.

Third, government and industry should simultaneously invest in upstream capabilities—including components, speciality materials, semiconductor-related industries and critical minerals—even if commercial returns take longer to emerge.

Finally, India's rapidly expanding stock of electronic products should be viewed as a future resource base.

Modern electronics contain dozens of strategically important minerals in miniature form, including copper, gold, silver, cobalt, nickel, lithium, rare earth elements, tantalum, indium and gallium.

Over time, discarded electronics will become an increasingly valuable source of these materials.

Critical mineral recovery and recycling should therefore be treated not merely as environmental policy, but as strategic resource infrastructure capable of complementing mining while strengthening long-term supply resilience.

Conclusion: Building National Electronic Capability

The next phase of India's electronics journey is not simply about manufacturing more devices.

It is about building national electronic capability.

That capability encompasses:

- design

- engineering

- manufacturing

- installation

- maintenance

- upgrades

- finance

- lifecycle services

- recycling

- continuous innovation

Taken together, these capabilities form a distributed ecosystem that supports manufacturing, healthcare, agriculture, energy, transport, defence, logistics and digital infrastructure simultaneously.

Electronics is no longer merely an industry that produces products.

It is becoming the productive infrastructure of the modern economy.

Nations that recognise this transformation will not simply manufacture electronics.

They will build, control and continuously renew the electronic systems that increasingly determine how modern economies produce, compete and innovate.