Smartphones Surpass Diamonds in US Exports: What’s Driving India’s Growth? 

Diamonds have been India’s bright spot for years in exports to the United States. But something different is happening now. Over the last three quarters, smartphones, led by iPhones, took the lead and are the largest product exported from India to the US. It is unusual and signals a huge change in India’s manufacturing and trade. According to the Department of Commerce, smartphone exports have overtaken non-industrial diamonds, raising India to a great height in the economy.

Export Level

In June 2023, India shipped $2 billion worth of smartphones to the United States, whereas just $1.44 billion worth of non-industrial diamonds were shipped out. That was not an isolated change. A trend had already begun, with smartphone exports overtaking the exports of diamonds for the first time in December 2022. 

At that point, the country had already exported $1.42 billion in smartphones and $1.3 billion in diamonds. That trend continued into 2023, which saw smartphone exports rise as diamond exports decreased. Smartphone exports grew to 43% during the final quarter of FY24; diamond exports shed 4.6%.

What’s Behind This Rise in Smartphone Exports?

The key reason for the shift is the Production-Linked Incentive (PLI) scheme. India brought about this scheme in 2020. PLI schemes provide financial rewards to companies if they achieve specific production targets, promoting local manufacturing. 

There are many industries under this scheme, and electronics is one of them, along with the significant part being the smartphone.

The exports of smartphones from India were minimal before the scheme started. India was exporting just $1.6 billion worth of smartphones worldwide in 2019, of which only $5 million was to the US. Fast forward to 2023, and these figures have taken some remarkable leaps.

In FY23, India exported $11.1 billion worth of smartphones, of which more than $2.15 billion was to the US alone. Most of this was due to Apple, which exported over $5 billion worth of iPhones from India. India has now become the new centre for exporting Smartphones, which the world talks about these days-the iPhone.

Big Players Like Apple

Not only is Apple the biggest player, but it is also fuelling growth. Contract manufacturers Foxconn, Wistron, and Pegatron have set up major manufacturing units in India. This has helped Apple export more iPhones from India than ever. iPhone exports touched $10 billion in FY24, accounting for 66% of India’s total smartphone exports. That is quite a jump and has helped make smartphones the top export from India to the US.

For example, another competitor in the same league is Samsung, which has also started making their phones in India. Exports have increased mainly due to Apple’s growing investment alone. Not only do they increase exports, but they also create employment and amass the manufacturing infrastructure in India.

Indian manufacturing- From lowest to fastest-growing maker

India is fast emerging as an electronics supply chain player, especially with China. A great deal of effort is still there on the part of the US to draw it out from China and more by it and other countries increasingly getting their electronics manufactured elsewhere. 

One of the up-and-coming economies that will take over this role is the economy of India. PLI is a part of this strategy and it is delivering. Biggies are upping investment here and exports are shooting up.

This is a shift and part of a larger strategy for India to become a manufacturing hub for smartphones and other electronics. The government is working hard to attract more companies to set up factories in India, which seems to be paying off.

Some Important Statistics 

The numbers tell the story of India’s changing export outlook: 

• $2 billion in smartphone exports in the June quarter of FY24.
• Non-industrial diamond exports came in at $1.44 billion in the same quarter
• Smartphone exports earnings were up 43%
• Quarter and year-over-year export decline of 4.6%
• Smartphone exports to the US doubled to 158% in FY24

Smartphone exports constituted 14% of Indian exports to the US. With iPhones held by Apple comprising close to half that figure, it brings out a gargantuan impact Apple has had on India’s export growth.

The company now receives almost half of the iPhones that supply the US market from India, marking a significant shift in global supply chains. This has been a considerable success for the company, but India’s share in the US smartphone market is still relatively small. 

The US imported $66 billion worth of smartphones in 2022 and $59.6 billion in 2023. Of this, India constitutes about 10%. There is still a long way to go if India can increase its production capacities and bring down costs.

Why Is This Happening?

Several reasons are responsible for this increase in the export volume of smartphones in India.

The Indian government has been very proactive in supporting the electronics industry to grow. The PLI is part of a larger effort to turn India into a manufacturing superpower. Here, the government offers financial benefits to companies that start producing in India to encourage more to do so and to export from the country.

With the US and Europe desirous of untangling themselves from China, India is gradually becoming an alternative manufacturing hub. Companies are desperate for new places to manufacture their goods, and India has the right blend of government support, skilled labour, and infrastructure to attract them. The transition is critically important for the electronics sector, which has a very complex and global supply chain.

This is why exports of smartphones are surging, with the logic behind it being high investments by Apple in India. As the company works through contract manufacturers to enhance production levels within the country, it’s showing promise.

Companies such as Samsung and the rest are increasing investment in India but it is through Apple that the topmost brand is being followed. All this is great news considering how much rise can be seen in future times as more companies get inspired by the success of Apple’s exports of the iPhone.

India-US Export Relationship

The export relationship between India and the US has, in fact, been changing. Historically, India has remained one of the large exporters of diamonds to the US. Indians have been highly renowned for diamond cutting and polishing. Non-industrial diamonds have always been one of the major exports from India to the US. Yet, with the changing global trade patterns, so do the kinds of products that get traded between countries.

The smartphones have now emerged as India’s top exports, thereby proving India’s diversified economy. This is a good omen for India, as India is not to rely on one industry entirely, as it reduces reliance on a single sector. It also strengthens the economic friendship between India and the US, inasmuch as the two countries trade more high-tech products such as smartphones.

Challenges Ahead

While smartphone exports from India are rising, several challenges remain. India needs further improvement in its manufacturing infrastructure to keep pace with the increasing demand for manufactured handsets. 

These improvements include more factory building, improvement of transportation networks, and maintaining a sound supply chain for components. Production costs in India also need to go down relative to those countries like China and Vietnam, who are the major leaders globally.

The PLI scheme has been relatively effective for India in terms of bringing companies to India. However, much more needs to be done to make India a first choice for manufacturers. Things are going to get pretty tricky from the government side as well because it will have to sustain the industry and continue to look for ways to trim costs and get better efficiency.

The Future of Indian Smartphone Exports

Looking forward, India is still an unexploited smartphone export industry. The country offers very amenable opportunities to seize the shift in global supply chains. Indeed, just like iPhone exports by Apple, it will not be a success story because investment from major companies into the country improves manufacturing capabilities and turns India into a heavy player in the global electronics market.

India will also discover areas where it can expand its share in the US smartphone market. Currently, India constitutes about 10% of US imports, and the scope for growth is available. The US imported almost $60 billion in 2023 in terms of smartphones and expects India to cut its costs and increase efficiency to capture an increased share.

This is one of the first times where India is surpassing the US to become its largest export. Such growth represents the country’s aspirations in building its capability toward manufacturing and trade. 

The PLI scheme continues to take its shape with investments from companies like Apple and several more major ones; an otherwise unknown sector found itself in the limelight because smartphone production is up and running as India’s new ace export. The future of the Indian smartphone export industry looks bright in growth and crosses many hurdles.