India's EMS Sector Set for Long-Term Growth Despite Weak Demand: Report

360 ONE Capital is optimistic about India's EMS sector's long-term growth, despite weak consumer demand. A report cites a structural shift to value-added manufacturing, localisation, and semiconductor opportunities as key growth drivers.

Despite weak demand in consumer electronics, 360 ONE Capital remains optimistic about the long-term growth of India's electronic manufacturing services (EMS) sector, citing increasing localisation, semiconductor opportunities and a shift towards value-added manufacturing.

In a sector update report, the brokerage said the industry is undergoing a structural transformation that is expected to support growth in the years ahead. "We remain positive on the structural growth story of the sector, with themes such as increasing RAC penetration, backward integration, value-added manufacturing, semiconductors, etc., providing a strong runway for growth," the report said.

Shift to Value-Added Manufacturing

According to the report, the Indian EMS industry is gradually moving beyond basic assembly operations and expanding into higher-value manufacturing activities. "There is a structural shift underway in the Indian EMS sector, from being a mere manufacturer/assembler to becoming a value-added player through backward integration into components and value-added manufacturing of PCBs and OSAT," it said.

Role of Government Policies

The brokerage also highlighted the role of government policies in strengthening the domestic electronics manufacturing ecosystem. "The government's push to make India self-reliant and a global manufacturing hub is evident from policy initiatives such as ECMS, ISM 2.0, etc. These supportive policies are expected to lay a strong foundation for the industry in the years ahead, enabling players to undertake increasingly complex manufacturing activities," the report said.

Sector Performance Amid Demand Pressures

The positive outlook comes even as parts of the consumer EMS segment witnessed demand pressures in the fourth quarter of FY26. "The Electronic Manufacturing Services (EMS) sector continued its growth trajectory, albeit at a lower pace as the consumer EMS space witnessed subdued growth/de-growth, whereas industrial EMS companies continued to see strong growth," the report noted.

Factors Behind Consumer Electronics Slowdown

The brokerage attributed weakness in consumer electronics manufacturing to slower demand for mobile phones and cooling products. "Weak growth... was attributable to subdued demand for mobile phones, driven by a sharp increase in prices resulting from a supply crunch in memory chips," the report said.

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