India is betting billions on breaking China’s dominance in smartphone production

India unveiled billions of dollars in new smartphone manufacturing incentives and an expanded semiconductor program on Wednesday, seeking to build on its success in assembling Apple’s iPhones and draw global electronics imports away from China.

Called the Mobile Phone Manufacturing Program, the £625 billion (about 6.5 billion) will run for five years and reward smartphone manufacturers based on qualifying sales, with incentives ranging from 2.25% to 5% and an additional 1.5% for sourcing key and small components in India. New Delhi also committed an additional R1.28 trillion (about 13.3 billion) to boost domestic semiconductor production, extending a 10 billion chip incentive program that was launched in 2021 with major support for chip equipment, materials, design, and research.

In the last decade, India has emerged as a very important smartphone manufacturing center, drawing production from Apple, Samsung, and Chinese brands including Xiaomi, Oppo, and Vivo. Apple began assembling iPhones in the country in 2017 and has since expanded production through suppliers including Foxconn and India’s Tata Group, with about 25% of its iPhones now made in India as the Cupertino company diverges its supply chain beyond China.

The production pressure extends beyond Apple. Last week, the Indian government cleared a smartphone manufacturing venture between China’s Vivo and Indian electronics manufacturer Dixon Technologies. New Delhi also lifted import duties on some phone and electronic components, a move that could lower production costs for companies, including Apple and Xiaomi.

Still, India still has a long way to go before it can challenge China’s dominance. China will account for 63% of global smartphone production by 2025, compared to India’s 18%, according to Counterpoint Research, underscoring the size of the manufacturing and supplier ecosystem New Delhi is trying to build.

The new plan marks a departure from the “multi-merger” playbook that defined India’s earlier manufacturing incentives “towards deep concentration, R&D and local value,” said Navkendar Singh, vice president at research firm IDC. India fared well in the last meeting while still relying on imports, he told TechCrunch.

“Apple will directly benefit,” Singh said, adding that strengthening India’s manufacturing and export guarantees would give the company greater hope of diversifying manufacturing away from China, while encouraging its supply chain partners to source more parts locally.

The smartphone production program will continue until March 2031. The Indian government expects the production of mobile phones during that period to be worth about R39 trillion (about 405 billion) and the plan is to create about 60,000 direct jobs.

This five-year plan could help generate strong long-term returns for the Indian ecosystem sector and attract more manufacturers to the country, Tarun Pathak, director of research at Counterpoint Research, told TechCrunch.

Smartphone brands are looking to “save every penny” in component sourcing as memory prices skyrocket, Pathak said. Local production, he noted, could provide benefits in the long run, especially as a weak Indian rupee raises import costs.

In addition to encouraging local manufacturing, New Delhi wants local companies to capture more value in the smartphone industry. The government plans to promote home-grown mobile phone brands, India’s IT Minister Ashwini Vaishnaw said at a press conference announcing the new manufacturing plans. The smartphone program includes an additional 3% incentive for eligible sales for product development and research aimed at improving Indian products.

India has homegrown handset makers including Micromax, Karbonn, and Lava. However, Indian brands have lost a significant foothold as Chinese rivals such as Xiaomi, Vivo, and Oppo have expanded in the country and are now a major part of the smartphone market.

The smartphone industry’s ambitions go beyond creating domestic brands. India should aim to account for 35% to 40% of the world’s mobile phone production, said Pankaj Mohindroo, chairman of the India Cellular and Electronics Association, whose members include Apple and Google.

The new policy could help build the supplier networks, engineering expertise, and manufacturing know-how needed to deepen India’s role in global supply chains, Mohindroo said.

India’s similar bets on mobile phones and semiconductors show that New Delhi is trying to build a deeper electronics manufacturing ecosystem that has supported China’s dominance. Its iPhone assembly boom has proven that the country can win a major role in global production. The tough test will be whether suppliers, technology, and high-value manufacturing follow suit.