New Delhi: India’s electronics manufacturing services (EMS) firms are in wait-and-watch mode as the West Asia war disrupts the tech component supply chain and pushes commodity prices upward. While Dixon Technologies and Syrma SGS aren’t factoring pricing and supply chain disruptions into account right away, top executives believe the next few quarters will be key for users, brands and shareholders alike.
In an interview with Mint, Sunil Vachani, cofounder and executive chairman of Dixon, said that industry bodies are currently evaluating “at a broad industry level how long it will take for capacities of commodities and components, which are destroyed in the war, to come back up.”
“The gas supply chain disruption wouldn’t be affecting us, but it will likely hit air conditioner manufacturers
directly,” Vachani said. While rising component costs may be passed to clients and hit demand, the specific impact on consumers is currently too difficult to quantify, he added.
Mint could not independently determine the percentage rise in the commodities that Vachani mentioned above. Engineering plastics are a key component of the internal structures of mobile phones, laptops and more. High-impact polystyrene, meanwhile, is a key component of exterior mouldings of consumer gadgets.
Jasbir Singh Gujral of Syrma SGS said the war and rising prices, depleting electronics supplies, wouldn’t affect the company’s operating margin in the March quarter.
Component prices are being adjusted for rising material and costs, he said, adding that while there are pass-through clauses, balancing costs between vendors and customers remains a constant tug-of-war. “At the end of the day, vendors, manufacturers and customers absorb some amount of the cost impact in such situations,” he said.
Gujral added that better clarity on the matter would become apparent as the war progresses. “We’ll get better clarity in about three months as the war takes shape. Prima facie, the impact of cost increases can be potentially offset by annual turnover discounts from long-standing vendor partners.”
Risk to growth engine
India’s electronics industry has risen steadily over the past few years and has been one of the most profitable sectors for shareholders. Data published by the ministry of electronics and IT (Meity) said that India’s EMS sector generated ₹11.3 trillion in revenue in FY25, up from ₹1.9 trillion in FY15 and growing at 19.5% annually.
In comparison, the benchmark 30-share BSE Sensex index rose to 77,414.92 points on the last day of FY25, up from 27,957.49 points on the last day of FY15—a 10.7% annual growth. EMS therefore offered shareholders double the returns over the 10-year period cited above.
Disruptions to the sector could, therefore, hit India’s fast-growing sector hard. Meity data from 2 March also showed that electronics accounted for $22.2 billion in export revenue, making electronics the second-highest sector for India in terms of exports.
On Monday, Union IT minister Ashwini Vaishnaw also addressed the conflict, stating that there is ‘no specific priority given’ to any electronics component because of the current war, and ‘it is a continuous, normal process (of localization) that is steadily going on’.
“Industries including semiconductors, passive components, mobile manufacturing and IT hardware have all said that so far, there is no impact (on business because of the war). It’s an evolving situation, and we’ll continue to interact with industry stakeholders to see if there are any stress areas arising at any specific point. We all believe that this war will be short-term and not very prolonged, which is also what the electronics industry’s mindset is at the moment,” Vaishnaw said at a press briefing on the sidelines of a ministry event.
No immediate impact
On 13 March, Mint reported that EMS firms were staring at a net revenue impact of $2-3 billion due to reduced mobile phone exports to West Asia. However, beyond the momentary export impact, industry analysts said that EMS firms are likely to remain insulated from sweeping supply chain disruptions or price-based impacts on revenue and margin for the time being.
“While there could be some indirect impact that would eventually impact electronics firms in the long run, right away, there is no direct impact of the war on electronics manufacturers. For most of the firms, inventories run into months, and there are long-standing contracts that take into account supply chain and pricing fluctuations,” said Harshit Kapadia, vice-president at brokerage Elara Capital.