India invests $19.8B to break China's dominance in smartphone manufacturing

What happened?

On July 15, 2026, the Indian government, led by Prime Minister Narendra Modi, announced two massive programs: a $6.5 billion smartphone manufacturing plan and a $13.3 billion semiconductor initiative. The goal is to strengthen the country's electronics supply chain and reduce dependence on China, which currently dominates global smartphone and component production. This announcement comes amid rising geopolitical tensions between China and the West and a global supply chain diversification strategy known as 'China+1'. India aims to position itself as the main beneficiary of this trend, leveraging its large domestic market, skilled workforce, and recent economic reforms.

Why is it important?

India has already achieved notable success in smartphone assembly: according to government data, 80% of smartphones sold in India are assembled locally. However, most components, especially semiconductors, displays, and batteries, are imported from China, limiting local value addition and exposing India to supply risks. With these programs, India aspires to capture a larger share of the value chain, moving from assembly to manufacturing critical components. The total investment of $19.8 billion is one of the country's largest industrial bets, comparable to the automobile manufacturing program of the 1980s that turned India into a global vehicle production hub. These plans are expected to generate over 1 million direct and indirect jobs in the next five years, according to estimates from the Ministry of Electronics and Information Technology. Additionally, they could reduce India's electronics trade deficit, currently at $60 billion annually, by 20-30% by 2030.

Consequences and context

This strategy is part of the 'Make in India' policy launched in 2014 and the Production Linked Incentive (PLI) scheme for electronics, which has already attracted companies like Apple, Samsung, and Foxconn. Apple, for instance, now assembles iPhone 14, 15, and 16 models in India and has expressed its intention to increase local production to 25% of its global volume by 2028. However, the lack of a local semiconductor supply chain limits its growth and forces chip imports, increasing costs and lead times. The new semiconductor plan includes incentives covering up to 50% of the cost of manufacturing facilities, which could attract companies like TSMC, Intel, and Samsung Foundry. TSMC has already shown interest in building a factory in India, according to Reuters sources, though negotiations are in early stages. The Indian government has also simplified approval processes and offered tax exemptions for 10 years to companies setting up chip manufacturing plants. However, challenges are immense: the investment required for a state-of-the-art semiconductor fab exceeds $10 billion, and construction timelines are 3-5 years. India lacks experience in advanced chip manufacturing (below 28nm) and will have to start with more mature technologies (28-65nm) before scaling up. Additionally, water, electricity, and logistics infrastructure need significant improvement. In comparison, China has invested over $100 billion in semiconductors in the last decade and still faces difficulties catching up with Taiwan and South Korea. India could follow a path similar to Vietnam, which has become an electronics assembly hub, but with greater ambition to integrate component manufacturing.

What readers should know

• India aims not just to assemble but to manufacture key components like displays, batteries, and chips. The smartphone program offers subsidies of 6% to 10% of production value to local and foreign manufacturers, focusing on high-end phones (price above $200) to maximize value addition.
• The semiconductor plan covers up to 50% of the cost of manufacturing facilities, capped at $3 billion per project. It is expected to attract at least 3-4 major plants in the next five years.
• China remains the world's largest electronics producer, with a 35% share of global smartphone production and 60% of semiconductor production. However, trade tensions and technology sanctions are driving many companies to diversify their supply chains. India could become a viable alternative, especially for Western markets seeking to reduce dependence on China.
• The initiative could generate millions of jobs and reduce India's electronics trade deficit. According to a Counterpoint Research report, India could capture 10% of the global electronics manufacturing market by 2030, up from 3% currently.
• Success will depend on execution: India has a mixed track record with large industrial projects. For example, the PLI scheme for automobiles increased local production but faced bureaucratic delays and infrastructure issues. In the case of semiconductors, the technical complexity is much greater.

"India is taking a bold step to transform its manufacturing sector. If it can execute these plans, it could redefine the geography of global electronics production," says a TechCrunch analyst. However, he warns: "The road is long and full of obstacles, but the opportunity is immense."