Strong domestic demand, government support, substantial export opportunities and benefits from the China Plus One strategy are driving the performance of the electronics manufacturing services (EMS) segment. The sector includes design, assembly and testing of components for products ranging from IT, consumer electronics, industrial electronics, auto, telecom equipment, lighting and printed circuit board assembly (PCBA).The sector’s historical performance and estimates highlight its resilience. Between 2019-20 and 2023-24, EMS companies (including component manufacturers) recorded revenue CAGR ranging from 8% to 49%. The estimates for the next three years, over 2023-24 and 2026-27, anticipate a healthy revenue growth CAGR between 22% and 69%. The data is compiled from an Axis Capital report released in April 2025.The order books of the EMS companies are growing, aided by a diversified client base and entry into new segments, like smart meters, railways and IT. Moreover, focus on gaining higher wallet share, improved product mix, and cost control measures, have helped the companies maintain healthy profit margins. Electronics demand is expected to remain healthy due to low penetration levels and rising disposable incomes. While the domestic production of electronic goods has increased by a CAGR of more than 17%, the exports of electronic goods have grown at a CAGR of over 20% between 2014-15 and 2023-24, according to a March 2025 PIB release.Segment-wise growth driversMobile phones have contributed significantly to the EMS segment with the highest CAGR growth in the last four years among other segments. The performance was aided by policy support, like differential duties, Phased Manufacturing Program (PMP) for sub-assemblies, and large-scale electronics PLI (production linked incentives).IT hardware is another key driver of the EMS industry. According to an Emkay report released in the last week of March 2025, strong policy push, rising trust in India as a supply-chain destination and its cost advantage over China are some factors that will support growth in the IT hardware segment. The government has set a target output of $40 billion for the IT hardware segment by 2030. The PCBA segment is gaining significance due to the government’s focus on domestic manufacturing, growing demand for miniaturised gadgets and increased digitisation of the medical sector.PCBAs are required to operate a wide variety of electronic products such as mobile phones, tablets, laptops, desktops, gaming consoles, televisions, washing machines, microwave ovens, ACs, refrigerators, automobiles, medical equipment, and industrial products. The improved value addition is expected to drive orders and revenue growth over the next two-three years.The other segment where EMS companies (especially the contract manufacturers) are growing is the heating, ventilation, and airconditioning segment. The strong demand for RACs (room air conditioners), coupled with government incentives in the form of PLI schemes for white goods, has motivated contract manufacturers to increase manufacturing capacities for RAC. This includes RAC assembly and components, including injection moulding, heat exchangers, and fans. The Axis Capital report believes that efficient resource utilisation, cost competitiveness, a smoother component supply chain, seasonal products, and demand surpassing supply are some of the factors that will continue to encourage contract manufacturing companies to increase manufacturing capacities.Government incentivesThe government aims to boost electronics industry output to $500 billion by 2030 and has introduced several measures to support the EMS sector growth. These include the Make in India initiative, PLI, and fiscal benefits like duty exemptions. “Ease of doing business, policy predictability, identification and addressal of disabilities, capitalising on positive geopolitical developments, and incentive support where necessary are identified as key drivers for achieving the electronics output target,” says the Emkay report.Electronics PLI and white goods PLI saw massive success in terms of localising production of mobiles and ACs in India by incentivising assembly; however, inadequate domestic supply of components used in these products has forced the companies to rely on imports.Mobile phones led electronics output 121218954Consumer electronics include televisions, digital cameras, PDAs, calculators, audio devices, headphones. Industrial electronics include power electronics, DC/ AC converters. Strategic electronics include military communication systems and satellite-based communication. Source: Axis Capital report.To curb component imports, the government launched the Indian Semiconductor Mission in 2021. The initiative has driven significant progress across the semiconductor ecosystem—including fabrication, packaging, design, and skill development. Also, multiple projects in the semiconductor space, from Tata Electronics, CG Power and Industrial Solutions and Kaynes Technology, received approvals in 2024.Powered up 121219011The government also approved the electronics component PLI for non-semiconductor components with an outlay of Rs.22,900 crore in March 2025. The scheme offers turnover-linked, capex-linked and hybrid incentives and aims to develop a component ecosystem in India. The scheme is targeted at increasing domestic value addition and integrating Indian companies into global value chains, says a JM Financial report. Analysts are bullish on PG Electroplast, Dixon Technologies and Avalon Technologies.PG ElectroplastThe contract manufacturer for consumer electronics and home appliances reported a strong performance in the March 2025 quarter.While the revenue grew by 77% year-on-year, net profit registered 104% growth. It reported growth across product categories (RACs, washing machines and coolers).The management has provided a strong year-on-year revenue and net profit guidance of 30.3% and 39.2% respectively, for 2025-26.It has planned capital expenditure of Rs.800-900 crore for 2025-26 for the establishment of new greenfield facilities, enhancing production capacity and improving operational efficiency.New product launches, deepening client relationships, strong balance sheet, robust order book and strategic investments are some of the key strongholds of the company. PhillipCapital report maintains its earnings estimates for 2026-27 but retains a neutral rating as it expects a moderate growth in the RAC segment in 2025-26. The report mentions that the moderate growth may create challenges in attaining the stated revenue guidance.Dixon Technologies (India)The EMS player offers design-focused solutions in consumer durables, home appliances, lighting and mobile phones. It is expected to report a strong performance in the March 2025 quarter.The revenue and net profit are expected to register a year-on-year growth of 147% and 152.8% respectively, according to consensus estimates of analysts compiled by Reuters-Refinitiv.Strong volumes in the mobile segment and improvement in the refrigerator business are expected to support performance during the quarter, according to a sector preview report by Systematix.New customer relationships in the mobile segment, focus on backward integration to increase value addition, higher ODM (original design manufacturer) mix, focus on high-margin segments and healthy return ratios are some of the key strongholds.Foray into the component production business, such as display module assembly followed by camera module assembly will support margins in the future.Avalon TechnologiesThe integrated EMS company reported a strong performance in the March 2025 quarter with revenue and net profit registering year-on-year growth of 58% and 243% respectively.Strong performance in both India and US businesses aided the revenue growth during the quarter. While gross margins contracted by 240 basis points, EBITDA margins surged 410 basis points, supported by operating leverage gains.The management has guided for an 18-20% growth in revenue for 2025-26 with a significant growth expected in the second half of the current financial year. ƒÜ Continued growth from existing clients and improved execution for new clients in the auto, industrial and clean energy segments will support the guidance.A Motilal Oswal report says that the company¡¦s long-term revenue trajectory is strong, aided by the addition of new customers in the US and Indian markets, order inflows from high-growth or high-margin industries, strategic collaborations, which will enhance competence and margin, and its foray into advanced technology segments.Telecom exports lead in overall electronics segmentIndia electronics exports CAGR (2018-19 to 2023-24) 121219016