West Asia Conflict Puts India's Electronics Supply Chain on Alert Despite No Major Disruptions Yet

The electronics and semiconductor supply chain in India has so far avoided significant disruptions stemming from the ongoing conflict in West Asia. However, industry leaders are raising concerns about the potential impact if hostilities continue for an extended period.

According to industry executives and market analysts speaking with businessline, electronics exports from India primarily move through air freight. While shipments destined for West Asia have come to a halt, alternative routes remain available, though they come with substantially higher costs. On the import side, the industry currently maintains visibility on component availability for roughly three to four weeks, but this timeline depends heavily on the continued flow of maritime cargo.

Sasikumar Gendham, who serves as President of the Electronics Industries Association of India (ELCINA), explained that logistics operations in West Asia have essentially ground to a halt for exports. However, the production floor hasn't experienced any tangible effects just yet. He warned that if current conditions persist for another two weeks, the sector could face serious challenges. Gendham pointed out that if China, being the dominant force in the market, encounters difficulties with fuel supplies, shipping operations could be compromised, which would inevitably affect Indian industries as well.

An official from the Indian Electronics and Semiconductor Association echoed similar sentiments, emphasizing that an extended conflict could place considerable strain on electronics sector operations. The official noted that exports in this sector rely predominantly on air transportation, while component imports arrive largely by sea, making it essential to monitor the evolving situation closely.

Market analysts have shed light on the interconnected nature of global supply chains in this sector and how India fits into this complex web of dependencies.

Tarun Pathak, who holds the position of Research Director at Counterpoint Research, pointed out that gases generated during oil and gas refining processes serve as essential materials in semiconductor manufacturing. Prolonged geopolitical tensions, he explained, have adverse effects on supply chain stability. While rerouting shipments around established maritime routes does drive up logistics expenses, the capital-intensive nature of this industry means the overall impact on total production costs remains relatively contained, allowing manufacturers to transfer these additional costs to their customers without much difficulty. That said, Pathak cautioned that if instability in West Asia drags on and energy prices surge dramatically, demand growth might decelerate more rapidly than supply adjustments can accommodate.

Pathak further highlighted that the situation becomes even more precarious for products further down the value chain. As data centre customers claim an increasingly larger portion of memory supply, traditional sectors such as smartphones, personal computers, telecommunications equipment, and consumer electronics are finding themselves with diminishing availability and facing steeper costs.

Some industry voices are viewing the West Asia situation as a potential turning point that could accelerate India's journey toward self-sufficiency in electronics and supply chain infrastructure.

Shashwath TR, who co-founded and leads chip design company Mindgrove Technologies as CEO, observed that while the movement of chips hasn't faced direct interruption, the broader ecosystem continues to be vulnerable to global disruptions in energy markets, logistics networks, or geopolitical developments that can set off cascading consequences. According to Shashwath, circumstances like these underscore why it's crucial to build stronger domestic capabilities across both chip design and manufacturing. He clarified that the goal isn't necessarily to depend entirely on domestically produced components, but rather to develop indigenous capabilities that would leave the country better equipped to handle future supply chain disruptions.