India scraps up to 7.5% import duties on electronics, smartphone parts

India eliminated import duties on components used in mobile phones and electronics, cutting costs for Apple and Xiaomi as New Delhi deepens its bet on local manufacturing.

India scrapped import duties of as much as 7.5 percent on components used in mobile phones and electronic devices, lowering manufacturing costs for Apple Inc. and Xiaomi Corp. as the government pushes to expand local assembly.

The decision eliminates the current 7.5 percent and 5 percent levies on components including camera modules, display assemblies and printed circuit boards, according to a government notification. India's electronics imports from China, which supplies a large share of these components, have contributed to a bilateral trade deficit that crossed $100 billion in recent years, government trade data shows.

The duty relief extends beyond smartphones. The government also extended tariff exemptions for lithium-ion battery manufacturing equipment through 2029, according to a separate notification. The moves come as India's production-linked incentive scheme for electronics has attracted commitments from Apple suppliers Foxconn, Wistron and Pegatron to expand local assembly operations. India's electronics manufacturing output reached $105 billion in the fiscal year ended March 2026, up from $75 billion three years earlier, according to the India Cellular and Electronics Association.

The policy shift shows India's reliance on imported components even as it seeks to reduce dependence on China. With domestic alternatives still limited in several critical categories, the tariff removal effectively lowers input costs for foreign manufacturers while buying time for local supply chains to develop. The next review of the duty structure is scheduled for the 2027-28 budget.

Apple and Xiaomi Stand to Gain Most

The tariff relief directly benefits the two largest smartphone vendors in India by market share. Apple assembles its iPhone models in India through contract manufacturers Foxconn and Wistron, while Xiaomi sources components for its budget and mid-range devices from Chinese suppliers. Both companies had flagged import duties as a cost headwind in prior earnings calls. The removal could improve gross margins on locally assembled units by 2 to 3 percentage points, according to supply chain estimates.

A $100 Billion Dependency

India's trade deficit with China has widened to more than $100 billion annually, with electronics and machinery accounting for the largest share of imports. The country imports a significant portion of smartphone components, solar equipment and pharmaceutical ingredients from China, creating what economists describe as a strategic vulnerability. Former Reserve Bank of India Governor Raghuram Rajan has warned that excessive dependence on a single source for critical inputs exposes the economy to supply disruptions and geopolitical pressure.

The tariff removal does not address the structural imbalance. India's domestic component ecosystem remains nascent, with local suppliers accounting for less than 20 percent of the value chain in smartphone manufacturing, according to industry estimates. Until domestic capacity catches up, lower duties will continue to benefit Chinese component makers as much as Indian assemblers.

Competing With Vietnam and Mexico

India's tariff reduction also aims to close the cost gap with rival manufacturing destinations. Vietnam, which has free-trade agreements with China and South Korea, already imports many of the same components duty-free, giving it a cost advantage of 5 percent to 8 percent on assembled electronics, according to trade data. Mexico similarly benefits from the USMCA trade pact for shipments to North America. The duty removal narrows but does not eliminate India's disadvantage, as logistics and power costs remain higher than in Southeast Asian peers.

This article is for informational purposes only and does not constitute investment advice.