India's New Smartphone Manufacturing Strategy: A Leap from Assembly to Value Capture

India's ambitions in smartphone manufacturing are entering a new phase. On July 15, the Indian government announced the "Mobile Phone Manufacturing Scheme," worth approximately 650 billion rupees (about $65 billion), spanning five years. The scheme aims to drive the industry from simple assembly towards research and development and deep supply chain integration through sales incentives and local procurement incentives for key components. At the same time, New Delhi also committed an additional 1.28 trillion rupees (about $13.3 billion) for domestic semiconductor manufacturing, expanding the existing $10 billion chip incentive plan.

This series of measures marks a profound adjustment in India's manufacturing strategy. Over the past decade, India has successfully attracted Apple, Samsung, and Chinese brands such as Xiaomi, Oppo, and Vivo to assemble phones in the country, leveraging labor costs and policy benefits. Apple currently produces about 25% of its iPhones in India, with deep involvement from suppliers like Foxconn and the Tata Group. However, India has remained at the low end of the global value chain—the assembly stage—while core components rely on imports. IDC Research Vice President Navkendar Singh pointed out that the new plan shifts the focus from "more assembly" to "depth, research and development, and local value capture."

Specific measures of the new plan include: granting smartphone manufacturers sales incentives of 2.25% to 5%, with an additional 1.5% if they use locally produced key components and sub-assemblies. Furthermore, the government encourages the development of domestic brands by offering an additional 3% sales incentive for Indian brand phone design and R&D. Information Technology Minister Ashwini Vaishnaw expressed hope that these policies will foster local phone brands, reviving the glory days of manufacturers like Micromax and Karbonn—though these brands have shrunk significantly under the攻势 of Chinese competitors.

India has already seen success in attracting global supply chain shifts. According to Counterpoint Research data, China accounted for 63% of global smartphone production in 2025, while India held 18%. Despite the wide gap, India's shipment growth rate and Apple's continued expansion have given policymakers confidence. Counterpoint Research Director Tarun Pathak believes that the five-year plan will help attract more manufacturers to establish ecosystems in India, especially as memory prices reach historic highs and the depreciation of the rupee raises import costs, improving the economics of localization.

However, challenges remain severe. China possesses the world's most complete electronic manufacturing ecosystem—from chips, screens, and batteries to various precision molds, with a highly concentrated supplier network. For India to increase its share from 18% to the 35%-40% expected by Indian Mobile Phone Association Chairman Pankaj Mohindroo, it will need to significantly narrow the ecosystem gap. The semiconductor investment in the new plan is a key part—without localized chips, it cannot truly break free from dependence on China's supply chain.It is worth noting that India is also attracting foreign investors through flexible policies. Last week, the government approved a smartphone manufacturing joint venture between China's Vivo and India's Dixon Technologies, while also canceling import tariffs on some mobile phones and electronic components. This strategy of encouraging localization without excluding foreign investment demonstrates New Delhi's pragmatic attitude.

Overall, India's new strategy for smartphone manufacturing is an important test of industrial upgrading. It is no longer content with the status of a "global assembly workshop," but is attempting to build a sustainable local value chain through policy guidance and long-term investment. If successful, India will not only occupy a more favorable position in the global electronics manufacturing field but will also provide a replicable model for other manufacturing sectors. The next five years will be a critical window to test its results.