Key Takeaways
- Budget 2026 lifts the Electronics Components Manufacturing Scheme to ₹40,000 cr, signaling a shift from assembly‑only to full‑stack semiconductor production.
- Government semiconductor spend jumps to ₹8,000 cr in FY27, and MeitY budget swells to ₹21,633 cr, providing hard‑cash backing for capex.
- Basic Customs Duty on mobile phones, PCBs and chargers drops from 20% to 15%, and duty exemptions extend to FY28 for critical inputs.
- Early winners like Kaynes Technology, Amber Enterprises and Dixon Technologies have secured multi‑billion rupee approvals across PCBs, camera modules and advanced packaging.
- Integrated projects led by Tata Electronics and OSAT players represent ~₹1.6 lakh cr of investment, setting the stage for a domestic fab ecosystem.
- Investors must weigh the bullish upside of margin expansion against execution risk and global supply‑chain volatility.
The Hook
You ignored the fine print on India’s electronics push—and that could cost you millions.
Why the Semiconductor Mission 2.0 Redefines the Value Chain
Budget 2026 is not just a line‑item increase; it is the launchpad for “Semiconductor Mission 2.0” (ISM 2.0). The mission’s core ambition is to localise every rung of the semiconductor ladder—equipment, raw materials, design IP, and final packaging. By nearly doubling the Electronics Components Manufacturing Scheme (ECMS) outlay to ₹40,000 cr, the government is signalling that it wants to move beyond the low‑margin assembly model that has dominated India for the past two decades.
From a financial lens, the policy translates into three tangible levers for investors:
- Revenue Expansion: Domestic demand for PCBs, camera modules, and advanced packaging is expected to grow >20% YoY as import duties fall and subsidies rise.
- Margin Accretion: Lower BCD (Basic Customs Duty) from 20% to 15% directly improves cost‑of‑goods‑sold (COGS) for EMS (Electronics Manufacturing Services) firms.
- Capital‑Intensive Tailwinds: The ₹8,000 cr FY27 semiconductor spend guarantees a pipeline of fab‑level capex, creating a “build‑to‑scale” environment for downstream players.
In short, ISM 2.0 creates a self‑reinforcing ecosystem where every participant—from PCB substrate makers to OSAT (Out‑source Semiconductor Assembly and Test) firms—benefits from a larger, more localized market.
Sector‑Wide Implications: From PCB Makers to Full‑Stack Fabs
The policy ripple effect is immediate. The BCD reduction on mobile phones, PCBA (Printed Circuit Board Assembly) and chargers reduces the landed cost of imported components, encouraging Indian manufacturers to source locally. Simultaneously, duty exemptions on semiconductor, display, solar equipment and consumer electronics extend through FY28, delivering a 3‑year cost‑certainty horizon—critical for multi‑billion‑rupee capex decisions.
Three rounds of ECMS approvals have already attracted ~₹54,500 cr of committed investment across PCBs, camera modules, display laminates and advanced components. This capital influx is reshaping the competitive landscape:
- Kaynes Technology: Secured approvals for multi‑layer & HDI (High‑Density Interconnect) PCBs, camera modules, and copper‑clad laminates, positioning it as a backend supplier for fab‑level packaging.
- Amber Enterprises: Leveraging a 10% import duty on AC components (excluding indoor/outdoor units) to deepen backward integration into power‑electronics modules.
- Dixon Technologies & Syrma SGS: Expanding into optical transceivers and flexible PCBs, creating exposure to 5G and IoT hardware.
Collectively, these firms are moving up the value chain, capturing higher‑margin design‑to‑test services that were previously outsourced to East Asian OEMs.
How Tata Electronics, Kaynes, and Amber Enterprises Position Themselves
Tata Electronics is spearheading a cluster of integrated projects that will transition from “construction” to “commissioning” in the next 12‑18 months. The group’s portfolio includes 10 semiconductor manufacturing and packaging plants, together representing roughly ₹1.6 lakh cr of investment. By anchoring these facilities in established industrial corridors, Tata is creating a hub‑and‑spoke model that will feed smaller EMS players with ready‑made wafers, test services, and IP.
Kaynes Technology’s multi‑layer and HDI PCB approvals give it a foothold in the high‑performance computing (HPC) and automotive sectors, where density and reliability are premium. The company’s recent foray into copper‑clad laminates also means it can capture upstream margin from substrate suppliers.
Amber Enterprises, traditionally a power‑solutions player, now enjoys a protective 10% import duty on AC components, encouraging domestic OEMs to source transformers, inverters, and power‑modules locally. This duty shield, combined with its JV‑driven PCB capabilities, creates a defensible moat against low‑cost imports.
From an investor perspective, each of these companies exhibits a clear pathway to margin expansion: higher‑value product mix, reduced import exposure, and participation in a government‑backed growth narrative.
Historical Parallel: The 2014 Electronics Push and What It Taught Us
India’s 2014 “Make in India” initiative similarly targeted electronics assembly. At the time, the ECMS outlay was ₹13,000 cr, and duty rates remained at 20% for most components. The result? A surge in assembly volumes but limited upside in R&D or fab‑level capability. Companies that merely focused on low‑margin assembly saw earnings plateau as global OEMs shifted back to China for cost reasons.
Contrast that with today’s policy mix: a near‑doubling of ECMS funds, a dedicated Semiconductor Mission, and longer duty exemptions. The lesson is clear—when the government couples fiscal stimulus with structural reforms (IP localisation, equipment subsidies), the ecosystem upgrades from “assembly hub” to “innovation hub.” Investors who missed the 2014 wave can capture the upside now, provided they select firms that are moving up the stack rather than staying stuck at the bottom.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The confluence of higher government spend, duty reductions, and long‑term capex visibility accelerates domestic fab construction. Companies with approved ECMS projects stand to benefit from a 15‑25% EBITDA uplift over the next three years. The sector’s price‑to‑earnings (P/E) multiples are still below global peers (average ~12x vs. 18x for Asian OSATs), offering a valuation gap that can be closed as margins improve.
Bear Case: Execution risk remains. Fab construction timelines are historically prone to delays, and the semiconductor supply chain still depends on imported lithography equipment subject to U.S. export controls. If global chip demand softens, the massive capex pipeline could turn into stranded assets, pressuring cash‑flow‑heavy players.
Strategic Recommendations:
- Prioritise firms with diversified product lines (PCBs + camera modules + power electronics) to mitigate single‑segment exposure.
- Monitor the disbursement schedule of the ₹8,000 cr FY27 semiconductor budget—early spend signals faster project ramp‑up.
- Consider a weighted‑average approach: blend exposure to established EMS leaders (Kaynes, Amber) with high‑growth pure‑play OSATs (Tata Electronics’ new fabs).
- Maintain a tactical cash reserve to add on dips if global chip sentiment weakens, as valuation compression can present entry points.
In sum, Budget 2026 is more than a fiscal statement; it is a roadmap for India to become a self‑sufficient semiconductor power‑house. Savvy investors who align their portfolios with the policy tailwinds stand to capture significant upside, while those who ignore the structural shift may find themselves left on the sidelines.