US Tariffs Shift Electronics Landscape, Indian Firms Seek New Markets

New U.S. tariffs are disrupting India’s electronics sector, forcing companies to re-evaluate expansion plans and explore alternative export destinations as previously competitive pricing advantages diminish.

Tariffs Bite into Export Margins

Several electronics manufacturers are reconsidering their local expansion strategies and actively scouting for new overseas markets. This pivot comes as recent U.S. tariffs negate India’s earlier pricing edge over China. While key products like smartphones, tablets, and laptops remain exempt, a significant portion of other electronics face substantial import duties.

Munoth Industries, a producer of lithium-ion cells for power banks in India, had established a partnership in January with U.S.-based Anker. This agreement aimed to supply cells for power banks destined for the American market.

“Currently, lithium cells are exempted from tariffs, but if Trump puts tariffs on them, our U.S. business may very well move out to other companies.”

—Jaswant Munoth, Vice Chairman, Munoth Industries

Munoth Industries had allocated a quarter of its production capacity to meet the demand of 500,000 to 1 million cells monthly for the U.S. market. Munoth highlighted that the U.S. market offers significantly higher profit margins, nearly double that of domestic sales, coupled with superior quality control standards.

The potential loss of U.S. business represents a considerable blow to the company’s financial projections, even if domestic capacity remains fully utilized. Future revenue streams are now facing serious uncertainty.

Awaiting Clarity on Key Products

The U.S. administration has imposed cumulative tariffs totaling 50% (25% plus 25%) on imports from India. Notably, items such as smartphones, laptops, tablets, servers, certain telecommunications equipment, integrated circuits, and flat panel display modules are among the 17-18 HS codes currently exempted from these levies. Industry estimates suggest these exempted exports are valued at approximately $50 billion.

However, all other electronic goods, including electric inverters, battery chargers, and transformer components, fall under 14 HS codes that are subject to the 50% tariffs.

Industry Adopts a Cautious Stance

Dixon Technologies, a prominent local contract manufacturer, is currently in a “wait and watch” mode. The company had previously anticipated a substantial increase in mobile phone exports to the U.S. by FY27 for its client, Motorola.

“Currently, there is nothing Dixon can do, honestly, but to wait. Nobody has an answer to this problem and companies cannot approach the government for help unless the tariff situation is definitively defined.”

—A person familiar with developments at Dixon Technologies

This source indicated that once the U.S. government officially announces its tariffs on mobile phones and other semiconductor-based products, likely by the third week of August, companies will seek government assistance.

Globally, supply chain disruptions continue to challenge manufacturers. For example, the global semiconductor shortage, exacerbated by geopolitical events, has already impacted production timelines and costs for many electronics firms worldwide, adding another layer of complexity to market strategies (SIA Report, 2023).