Buy Dixon, Samvardhana as US tariffs may boost electronics exports: Nomura

Nomura pointed out that India is strategically positioned to capitalise on these changes, especially as the US looks to adjust its approach to trade with India, particularly in electronics

Foreign brokerage firm Nomura has maintained a ‘Buy’ rating on Dixon Technologies and Samvardhana Motherson, citing that the evolving US tariff strategies could majorly boost India's electronics exports, particularly in the mobile phone sector.

 

The Tokyo, Japan-based brokerage has kept its target prices unchanged at Rs 13,911 for Dixon Technologies and Rs 128 for Samvardhana Motherson International.

 

However, on the bourses, shares of Dixon Technologies and Samvardhana Motherson have both fallen approximately 6 per cent in the past month, while the BSE Sensex has also declined about 4 per cent during the same period amid a broader market correction.

 

 

The brokerage pointed out that India is strategically positioned to capitalise on these changes, especially as the US looks to adjust its approach to trade with India, particularly in electronics.

 

“India is likely to benefit from the shifting supply chain dynamics and the potential for reciprocal tariffs between the US and India,” said the Nomura analysts, Siddhartha Bera, and Kapil Singh, in their recent report. 

 

“The US’s push for reciprocal tariffs could help India’s electronics industry by enhancing its competitiveness, particularly in mobile phones and IT hardware,” they added.

 

The US push for reciprocal tariffs

 

The United States has long advocated for reciprocal tariffs on Indian goods, citing what it perceives as unfair trade practices. As a result, the Indian government is reportedly considering various strategies to mitigate the impact, including a bilateral trade agreement with potentially zero duties on key goods. 

 

These tariff changes come at a time when the electronics sector is seeing rapid growth, with India’s electronics exports to the US surging considerably in recent years.

 

“India’s electronics exports to the US have grown substantially from $2.5 billion in FY20 to approximately $11 billion in FY24,” the report highlighted. “While smartphones, especially Apple products, make up about 50 per cent of these exports, India still only accounts for around 2 per cent of the total US electronics imports. In comparison, China and Mexico contribute 35 per cent and 22 per cent, respectively, of the US’s electronics imports,” the report added.

 

Despite this, analysts noted that India’s position is improving due to its gradual reduction in import duties on components such as printed circuit board assemblies (PCBAs), cameras, and displays. This is in stark contrast to the US, where there is no import duty on most electronics, giving India a comparative advantage in manufacturing and export potential.

 

The shift in supply chains

 

Under the proposed tariff changes, the US could implement a similar tariff on Indian products or apply a weighted average tariff across a broad basket of goods. In either case, the impact on India’s electronics exports would be minimal, with weighted average tariffs already low at around 3-4 per cent. The larger question revolves around the potential shift of global manufacturing to India as a result of these changes.

 

For example, mobile phone manufacturing, which is a key driver of India’s electronics exports, could see a shift in production away from countries like China, where tariffs are currently higher. 

 

“While India has made considerable strides in mobile manufacturing, a potential shift of production to the US is unlikely due to high labour costs and a large wage disparity,” the report explained. 

 

“With an average hourly wage in India of $1.5 compared to $15 in the US, manufacturing in the US is simply too expensive,” analysts said.

 

India’s competitiveness, however, is expected to grow as the US continues to impose tariffs on Chinese and Mexican imports. "With the 20 per cent tariffs on products from China and Mexico, India could see an influx of manufacturing and exports, especially in mobile phones,” the analysts added.

 

The role of leading Indian players

 

Several Indian companies are already positioning themselves to take advantage of the shifting dynamics, analysts at Nomura said. 

 

Global brands such as Apple and Samsung are increasing their reliance on India for production, with Samsung and Apple expected to source around 23 per cent and 15 per cent of their global mobile production from India by FY25, respectively. Motorola and Google have also started major mobile exports from India.

 

Therefore, analysts project that India’s smartphone exports could reach $20 billion by FY25, and with global sourcing shifting further to India, the figure could soar to $70 billion by FY30.

 

In this context, Dixon Technologies and Samvardhana Motherson are well-positioned to benefit from these shifts. 

 

“Within our coverage, we expect key beneficiaries will be Dixon (which is looking at strong traction in mobile exports from Motorola/Google) and SAMIL (through mobile display components),” analysts said.

 

That said, with the US’s evolving tariff strategy and India’s growing role in global electronics supply chains, analysts believe the above-mentioned companies are expected to see major upside potential in the next few years.