Prices of Electronic Devices, Appliances To Go Up 10–25 PC on Supply Worries

Chennai: Electronic devices and appliances have already seen price hikes as some inputs, including memory components, PCU, PCB, and display items, become costlier due to Chinese curbs on rare earth magnets and AI-related demand. The industry expects prices to further go up by 10-25 per cent in the short to medium term. In an interview, Ashok Chandak, President, India Electronics and Semiconductor Association (IESA), discusses the impact of China's export curbs and investment restrictions on India's electronics manufacturing sector.

China has been curbing exports of rare earth minerals and magnets for some time. Now they are also restricting investment deals and technology transfer. For the electronics sector, which inputs have become scarce and how important are they in manufacturing?

India is particularly getting impacted in products such as speakers, microphones, motors, camera actuators, industrial automation systems, infrastructure equipment and power electronics.

However, it is important to understand that rare earths are not merely a mining issue. The bigger challenge lies in manufacturing and processing. India has some rare earth reserves, but we have not yet mastered cost-effective processing technologies. The same applies to countries such as Australia, which have significant reserves but lack China's scale and efficiency in processing. China dominates the supply chain because it has built highly competitive manufacturing capabilities over several decades.

Other countries, including India, are now taking steps to develop processing capabilities. Government initiatives and industry efforts are underway, but the critical minerals supply chain continues to be largely controlled by China. So far, however, there has been no major stoppage of manufacturing activity. Prices have increased, but the situation has not become a showstopper.

As far as investment and technology transfer are concerned, what impact will China's restrictions have on electronics manufacturing?

India already had restrictions under Press Note 3 for investments from neighbouring countries. While some relaxations have been introduced recently, certain restrictions remain.

Now China is also tightening controls on investments and joint ventures involving Indian entities. This is creating challenges for industries, including automotive and electronics sectors, particularly smartphone component manufacturing. Several projects are now being evaluated on a case-by-case basis.

The restrictions are likely to delay investments. A number of machinery, equipment and electronic components used in manufacturing depend on Chinese companies, and this is creating additional hurdles.

Even when Press Note 3 restrictions were in place, electronics was one sector where investments from China were often approved. What is the status now?

The situation is still evolving. Discussions are ongoing regarding ownership structures and control. The controlling entity is expected to remain Indian. Investments with minority stakes are becoming easier to manage after the relaxation of Press Note 3, but approvals continue to be examined carefully.

How dependent is India's electronics manufacturing sector on China for imports and technology?

Dependence on China for technology is not very high. However, India relies significantly on China for components, tooling and manufacturing equipment.

This dependence is particularly visible in consumer electronics, appliances and smartphones, where costs are extremely sensitive. Alternative suppliers exist in Taiwan, Korea, Japan and Southeast Asia, but they are often less cost-competitive than China.

Can alternative markets replace China as a supplier?

It is difficult to assign a specific percentage because dependence varies across products and components. Industry is actively exploring diversification opportunities. Countries such as Australia, the US and Japan can supply equipment, machinery and critical materials.

However, China's current position is the result of decades of investment and ecosystem development. No single country can replace China overnight. The real issue is not replacement, but reducing dependency.

Will China's dominant position in rare earths create uncertainty and shortages?

There will certainly be uncertainty and short-term disruptions. Companies will face challenges and supply-chain hiccups.

However, these problems are not insurmountable. They can be resolved, though the process will not be easy.

Are manufacturers increasingly opting for assembly of imported components or finished goods? How will this affect value-addition targets?

Value addition depends on local production. Semiconductor imports are not heavily dependent on China because most advanced semiconductors come from companies based in the US, Europe, Japan and Korea. Only low-end chips face some impact.

The bigger challenge is in PCBs and PCB materials, where costs have risen due to both China's restrictions and global geopolitical disruptions. Some electronic components such as connectors are also affected.

There has not been a significant rise in finished-goods imports so far, though imports of sub-assemblies may increase. Some companies may rely more on Southeast Asian suppliers.

India's value-addition targets should not be significantly affected because these are medium- and long-term goals. As semiconductor and component manufacturing facilities become operational, localization and value addition will increase. The area of concern remains display manufacturing, where India continues to depend heavily on China.

Why is display manufacturing a concern?

India's display manufacturing ecosystem is not expected to expand significantly in the next 12-18 months. Only one major project has been approved recently, while most current activities focus on display assembly rather than display fabs.

This could continue to create supply-chain vulnerabilities.

How can manufacturers address display-related challenges?

Companies may need to source from Korea, Japan and Southeast Asia. They may also continue importing through China or Hong Kong at higher prices. Alternative sourcing arrangements and sub-assembly strategies will need to be explored.

How much can electronic product prices rise in India in the medium term?

Electronic product costs depend on three key factors: semiconductors, memory and other components.

Memory prices have already risen significantly because of global AI-driven demand. Many suppliers are shifting capacity towards high-bandwidth memory, affecting the availability and pricing of conventional memory products such as DRAM and Flash. This has already impacted smartphones, laptops and appliances.

PCB costs have also risen due to raw material shortages and higher prices. Combined with increases in other component costs, electronic products could see overall price increases of around 10-25 per cent.

Some price increases have already taken place. Over the next year, products could become another 10-25 per cent more expensive depending on the category. The impact will be greater for products such as smartphones, energy meters and electronics-intensive appliances than for products like washing machines or refrigerators.

The rare earth processing industry is also facing challenges in sourcing machinery. How will this affect India's processing ambitions?

Machinery can be sourced from countries other than China. The bigger challenge is acquiring the processing technology and expertise.

China has mastered rare earth processing and made it highly cost-effective. Other countries such as the US and Australia also possess rare earth resources, but their processing capabilities are not as economically competitive.

Will these curbs affect India's electronics and semiconductor production and export targets?

On the semiconductor side, the long-term targets remain on track. New plants are being set up and the overall roadmap remains intact.

India's electronics manufacturing sector is expected to reach $400 billion by 2030, while the broader electronics ecosystem could approach $500 billion when components and chips are included.

There may be some short-term disruptions over the next three to nine months, which could affect production and exports temporarily. However, the long-term trajectory remains unchanged.

What is your outlook for FY27?

Semiconductor manufacturing plans remain on track as several plants are already operational and others are scheduled to come online over the next two years.

For electronics manufacturing, India could achieve production of around $200-225 billion in FY27. There may be a correction of around 5-10 per cent from earlier expectations because of current disruptions.

What should the government do to support the industry?

The government should ensure that incentive disbursements are timely and that projects receiving incentives are monitored more closely to accelerate implementation.

The next phase of the Semicon India programme should be announced quickly. Greater support is also needed for specialty materials, capital equipment, manufacturing process technologies and R&D.

Academic institutions are already receiving support, but accountability and execution by beneficiary companies should be strengthened.

Can the government engage with China to address these issues?

The more effective approach would be to accelerate localization and diversify supply chains.

India should move faster on trade agreements such as the EU-India FTA and the proposed trade arrangements with the US. Stronger government-to-government engagement with alternative supplier countries can help reduce dependence on China.

Does this challenge also present an opportunity for India?

Absolutely. India should view this as an opportunity to accelerate manufacturing capabilities across sectors, just as it did in mobile phones.

The government can help through faster approvals, predictable policies, infrastructure support, R&D incentives and quicker disbursement of incentives. However, industry must also take greater responsibility.

There is a need to accelerate component manufacturing, PCB and substrate production, display ecosystem development, chemicals and gases manufacturing, rare earth processing and magnet production.

India's semiconductor and electronics journey should not be seen as a race to catch up with any one country. It should be viewed as a long-term capability-building exercise. The current supply-chain disruptions underline the importance of technological ownership, materials expertise, component manufacturing and genuine competitiveness.