Electronics Sector Seeks Policy Stability Amid US-China Thaw

• US halves China tariffs to 10%, narrowing India's 10% cost edge; ICEA urges policy support.
• Electronics exports to US up 42% to $22.2B in H1 FY26; smartphones +60% to $13.4B.
• Cost disability vs China: 18-19% in 2019 to 12% now; risks PLI investments, supply chain gains.

India's​‍​‌‍​‍‌​‍​‌‍​‍‌ electronics sector has appealed the government to keep up the supportive local policies as it worries that a disengagement of the US-China trade war could take away the export competitiveness that it has been building with a lot of effort. This was the main message in a letter from the India Cellular and Electronics Association (ICEA) dated. The sector, which is the flagship success of the "Make in India" initiative, has gone into panic mode after the US announced that it will reduce its fentanyl tariffs on Chinese goods from 20% to 10% by November 10, following a talk between US President Donald Trump and Chinese President Xi Jinping on October 30.

The ICEA stated that this 10 percentage point reduction moves India & rsquo’s relative cost advantage very close to zero and that the volume of exports, the attractiveness of investment, and the production under the Production Linked Incentive (PLI) scheme could be affected if this situation were to remain. "The decrease may now considerably counteract the restoration of China's export competitiveness", the letter stated., pointing out that the main danger comes from China being able to revert the global supply chain diversification trend with its subsidies, advanced tech, and economies of scale.

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Since 2018, US tariffs under Section 301 of the US Trade Act had been favorable to India, as they exempted India's electronics exports and put China to a disadvantage. Consequently, Indian electronics exports to the US skyrocketed by 42% to reach $22.2 billion in H1 FY26 (compared to $15.6 billion in H1 FY25), with smartphones growing 60% to $13.4 billion (compared to $8.4 billion). The members of ICEA that are Apple, Google, Foxconn, Vivo, and Tata Electronics, among others, are of the opinion that it is imperative to keep the advantage.

India's cost handicap in comparison to China went down from 18-19% in 2019 to 12% in five years due to PLI, bill of materials, capex, power, and logistics as well as tariff differentials. Nevertheless, if more tariffs are relaxed, manufacturing could be re-centering in China again thus, India would lose her position despite the $300 billion electronics market by ​‍​‌‍​‍‌​‍​‌‍​‍‌2026.