Semiconductor push, govt support driving EMS sector's growth, but valuation remains a concern: How 3 stocks with most buy calls are placed

India’s electronic manufacturing services (EMS) sector is growing at a healthy pace, supported by rising demand for electronics and strong orders from sectors such as defence, aerospace, artificial intelligence (AI), automobiles, electric vehicles and clean energy. According to KPMG, one of the Big Four accounting firms, the Indian EMS industry has expanded from $10-12 billion in FY2019-20 to $40-45 billion in FY2024-25.

Yet, India accounts for just 5-6% of the global EMS market, leaving room for growth. The share is expected to rise over the coming decade, with KPMG projecting the Indian EMS industry to cross $150 billion by FY2029-30.

Growing export opportunities, the China-plus-one strategy, which involves companies diversifying their supply chains beyond China, and government support are some of the other key tailwinds. At the same time, domestic EMS companies are gradually moving beyond basic assembly to more complex, higher-value products, opening another avenue for growth.


Investor enthusiasm around the sector is visible in the performance of nine EMS stocks covered by multiple brokerages. The group has delivered an equal-weighted average return of 55.3% so far in 2026, compared with 1.1% for the Nifty 500 Equal Weighted Index. Seven of the nine stocks have delivered positive returns, while three have gained over 100%. The analysis is based on closing prices as of 28 September 2026.

Share of global EMS market in 2025

Asia Pacific accounts for more than half of the global EMS market.

Government support

Government policies have played an important role in the sector’s growth. Initiatives such as Make in India and the Production Linked Incentive (PLI) schemes have encouraged domestic manufacturing across segments including mobile phones, electronics, white goods, IT hardware and telecom equipment. The Electronic Component Manufacturing Scheme complements these initiatives by encouraging local production of critical components such as printed circuit boards, camera modules and display modules.

Semiconductor push

The government’s semiconductor push could provide the next leg of growth for the electronics manufacturing ecosystem. While India Semiconductor Mission (ISM) 1.0 focused on laying the foundation for semiconductor manufacturing, the recently approved ISM 2.0, or Semicon 2.0, aims to deepen the country’s semiconductor design and manufacturing capabilities. With a budgetary outlay of Rs.1.27 trillion, the programme will focus on semiconductor design, equipment, fabrication, advanced packaging, and research and development.

For EMS companies, greater availability of domestically manufactured semiconductors could strengthen supply chains, reduce dependence on imports and provide opportunities to move further up the value chain. Experts therefore see Semicon 2.0 as an important step in widening opportunities for Indian EMS players.

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Raghavan Viswanathan, Partner, Deal Advisory, KPMG in India, says ISM 2.0 is aimed at long-term value creation and greater semiconductor self-reliance. “ISM 1.0 and 2.0, and possibly a future 3.0, could help make the 2030s India’s decade for semiconductors,” he says.

Complexity, a growth driver

Another important shift is taking place within the EMS industry itself. As large original equipment manufacturers (OEMs) increasingly outsource manufacturing, domestic EMS companies are moving towards more complex applications. These require stronger engineering capabilities, certifications, testing, reliability and system-integration expertise.

A recent Motilal Oswal Financial Services (MOFSL) report argues that complexity, rather than scale alone, is becoming a key differentiator in the EMS business. As OEMs outsource more technically demanding products to specialised manufacturing partners, the addressable market for Indian EMS companies could expand. Greater complexity can also improve customer stickiness and provide EMS companies with a longer runway for growth.

Vinay Jain, Head of Research & Fund Manager at Karma Capital, remains positive on the long-term opportunity and believes the EMS story in India is changing. Companies are moving beyond simple assembly and printed circuit board assembly (PCBA) towards box builds, system integration, precision engineering and more complex electronics. In other words, the sector is gradually evolving from a capacity-led story to a capability-led one.

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The shift towards higher-value products could also help margins. Analysts see scope for operating margin improvement as the product mix shifts toward areas such as automotive, industrial and defence electronics. Companies could also benefit from operating leverage as higher utilisation spreads fixed costs over a larger revenue base.

Premium valuations

The sharp rally in EMS stocks, however, has also pushed valuations higher. According to Bloomberg data, the historical price-to-earnings ratios of the nine EMS companies range from 50 to 138 times. Five of the nine are trading at a premium of more than 20% to their respective five-year average valuations.

“Valuations are split, and investors should pay only for genuine depth of manufacturing,” says Manish Bhandari, CEO and Portfolio Manager, Vallum Capital.

Bhandari expects much of the benefit from ISM 2.0 to emerge between FY2026-27 and FY2028-29 and believes investors should build positions gradually. “This is a stock picker’s market: leadership will be concentrated in the few companies moving up the value chain, not spread across every company with ‘electronics’ in its name,” he adds. A recent JP Morgan report has also flagged concerns over premium valuations for some EMS companies. It argues that higher price-to-earnings multiples should ideally be backed by superior return on capital employed (ROCE), particularly because the EMS business can be capital intensive and have high working capital requirements.

Risks remain

Investors should not overlook the risks. Execution challenges, customer concentration, working-capital management and changes in policies are among the key concerns flagged by experts. Here is how three EMS stocks with the most number of buy recommendations on Bloomberg are placed:

Syrma SGS Technology

*Diversified order book across auto, consumer, industrial, healthcare, IT and railways.

*Healthy execution and steady domestic demand provide strong growth visibility.

*Margins could improve as the share of higher-margin products rises and the segment mix improves.

*Exports, backward integration, and a healthy balance sheet are key positives.

Growth circuit

Dixon Technologies

*Strong growth in the mobile segment, along with the Jivo joint venture, should support medium-term growth.

*Management expects exports to become a key growth driver for the mobile business.

*Telecom and IT hardware should drive the non-mobile business, aided by 5G, broadband, exports and expansion into servers and data-centre hardware.

*Backward integration is expected to support margins.

*Analysts expect a renewed high-growth phase, aided by smartphone exports and policy support.

Amber Enterprises

*Entry into mobile manufacturing, through partnerships with Oppo, Realme and OnePlus, expected to boost earnings.

*The electronics business should benefit from the scaling up of Power Electronics and Industrial Automation.

*Higher-margin businesses and backward integration are key growth drivers.

Stocks mentioned are not recommendations. Consult your financial adviser.