As India and China navigate the balance between diplomacy and potential conflict, Indian businesses are actively seeking to reduce their dependency on Chinese products and investments.
Additionally, the China Plus One strategy has emerged as a pivotal approach for multinational corporations (MNCs) looking to diversify their supply chains beyond China.
This strategy aims to mitigate risks associated with over-reliance on a single country for manufacturing and sourcing. As global companies reassess their supply chain strategies, India stands out as a prime candidate to benefit significantly from this shift.
Although government initiatives like ‘Make in India’ and ‘Aatmanirbhar Bharat’ have contributed to diminishing this dependency to some degree, it’s important to acknowledge that many sectors still remain directly or indirectly reliant on China.
Here are a few Indian EMS stocks that have significant dependency on the Chinese market:
Dixon Technologies (India) Limited
With a market cap of Rs. 83,353.3 crores, the shares of India’s largest electronics contract manufacturer surged by nearly 1.6 percent on BSE to hit a new 52-week high at Rs. 15,999.95 on Friday.
Dixon acquired a majority stake in Ismartu India, a subsidiary of China’s Transsion Technology, which manufactures smartphones for brands like Itel and Infinix. This move underscores Dixon’s strategy to leverage Chinese technology in mobile manufacturing.
Additionally, the company proposed to form a joint venture with China’s HKC with a 74 percent stake, to manufacture display modules for various electronic devices. This partnership aims to enhance local manufacturing capabilities while relying on Chinese expertise.
Dixon has secured a contract to manufacture laptops for Lenovo, another Chinese company, under India’s Production-Linked Incentive (PLI) scheme. This collaboration illustrates Dixon’s role as a facilitator for Chinese brands looking to establish or expand their presence in India.
In Q2 FY25, the company’s revenue from operations reached Rs. 6,580 crores, rising by nearly 101 percent YoY, while the net profit grew by 109 YoY percent to Rs. 140 crores.
The stock has delivered multibagger returns of nearly 176.6 percent in the last one year, as well as around 133.7 percent returns year-to-date.
Incorporated in 1993, Dixon Technologies (India) Limited is primarily involved in the business of manufacturing electronic goods such as consumer durables, home appliances, lighting products, mobile phones, refrigerators, telecom products, hearables & wearables and security devices.
Syrma SGS Technology Limited
With a market cap of Rs. 6,743 crores, the shares of this company engaged in electronics manufacturing services (EMS) surged by nearly 2.5 percent on BSE to Rs. 402.35 on Friday.
The company relies on a diverse range of raw materials to support its extensive electronic manufacturing services, and its resilient supplier network spans 19 countries.
Syrma sources materials from around 1,669 suppliers across 21 countries, which mitigates risks associated with dependency on specific regions or suppliers. This includes suppliers from the USA, Singapore, and China.
This diversified sourcing strategy helps mitigate risks associated with dependency on imports. However, the company does face challenges related to global supply chain dynamics and potential disruptions that could arise from geopolitical tensions or logistic issues.
In Q2 FY25, the company’s revenue from operations reached Rs. 1,160 crores, rising by nearly 93 percent YoY, but the net profit declined by 28.6 YoY percent to Rs. 20 crores.
The stock has delivered negative returns of nearly 34 percent in the last one year, as well as around 40.5 percent returns year-to-date.
Syrma SGS Technology Limited is engaged in the manufacturing of various electronic sub-assemblies, assemblies and box builds, disk drives, memory modules, power supplies/adapters, fibre optic assemblies, magnetic induction coils & RFID products and other electronic products.
Kaynes Technology India Limited
With a market cap of Rs. 33,926.7 crores, the shares of a global leader in electronic system design and manufacturing solutions surged by nearly 2 percent on BSE to Rs. 5,619.1 on Friday.
In 2023, Kaynes Technology relied heavily on imported raw materials, which constituted about 70 percent of its sales costs. This dependency includes various electronic components that are predominantly sourced from China.
However, the company aims to reduce dependency on international suppliers, including those from China, by enhancing local production of electronic components and systems.
Currently, the company is strategically positioned to take advantage of the growing electronics sector in India. Keynes Technologies is leveraging the ‘China+1’ trend and import substitution initiatives to expand its ESDM capabilities. Its focus on high-value segments like aerospace, defence, and medical electronics aligns with India’s push for local value addition.
Despite its focus on domestic manufacturing, Kaynes Technology still faces challenges related to supply chain dependencies, as the semiconductor industry globally has been significantly influenced by Chinese manufacturing capabilities, which dominate various segments.
In Q2 FY25, the company’s revenue from operations reached Rs. 504 crores, rising by nearly 70 percent YoY, while the net profit grew by 104 YoY percent to Rs. 51 crores.
The stock has delivered multibagger returns of nearly 138.6 percent in the last one year, as well as around 106.6 percent returns year-to-date.
Kaynes Technology India Limited is primarily engaged in the business of design and manufacturing of advanced electronic modules and solutions catering to a wide range of industries.
Written by Shivani Singh
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