Next Gen Industrials
Capex-light growth for electronics manufacturers
06 Jun 2025
India’s electronics manufacturing sector is growing fast, but scaling
with high upfront capex is becoming harder to sustain. From production lines to
automation, fixed asset costs continue to lock up critical capital. This is especially true in
the Electronics Manufacturing Services (EMS) segment, where tight working
capital (WC) cycles and debt-heavy balance sheets are common. To stay agile,
manufacturers are adopting capex-light models by using lease structures, vendor
finance, and better WC discipline.
This shift is not just tactical. It’s a strategic pivot that frees up
cash for design, innovation, and expansion. Nowhere is this clearer than in the
explosive growth of EMS players who are reshaping production models. In this
edition, we unpack the rise of asset-light growth and what it means for the
future of electronics manufacturing in India.
Growth of EMS in electronics manufacturing
As illustrated in Exhibit 1A & 1B,EMS in India is projected to grow a CAGR of 27%, reaching INR 6L Cr by FY 27, driven by reduced capital requirements, faster scalability, and quicker time-to-market. While OEMs are growing at 17% CAGR, EMS is expanding at a much faster pace, steadily capturing a larger share of the electronics manufacturing mix. This trend reflects a broader shift toward capex-light models.
EMS
enables scalable, cost-efficient production without asset ownership, enhancing
speed, automation, and financial flexibility. As a result, EMS is seeing
widespread adoption across high-growth segments such as mobile phones, IT, and
automotive etc.
Exhibit
1A: Increasing share of EMS in electronics
manufacturing
Exhibit
1B: Increasing share of EMS in electronics
manufacturing
Asset-Finance
Tools: Reshaping How Equipment Is Acquired
Traditionally, manufacturers have relied on direct equipment purchases,
locking capital into high-cost assets like Surface Mount Technology (SMT) lines,
testing rigs, and assembly automation. But rising cost pressures and the need
for operational flexibility are prompting a shift. Today, electronics
manufacturers are tapping into a growing ecosystem of asset-finance solutions, as illustrated in Exhibit 2, to fund capacity without burdening their balance sheets.
- Vendor financing allows machinery to be acquired with minimal
upfront cost, often bundled with servicing and long-term payment plans
- Leasing models help avoid asset obsolescence, especially for fast-evolving tools
like robotics, optical inspection, or AI-enabled testers
- Pay-per-use models are emerging for capital-intensive
infrastructure, charging by machine uptime, production output, or usage hours
- Asset refinance let companies monetize owned assets while
retaining operational control
Exhibit
2: Equipment acquisition models
Buy vs lease: Making the Right Financial Choice
In electronics manufacturing, equipment acquisition decisions involve
strategic considerations beyond pure financials. Leasing provides lower upfront
costs, flexibility, and bundled maintenance, making it ideal for rapidly
evolving technologies like SMT machines where obsolescence risk is high. Lease
payments are fully tax-deductible. Buying suits stable, long-term assets,
offering operational control, potential cost savings, and depreciation
benefits, but requires substantial upfront investment and ties up capital. Exhibit
3 highlights how leasing offers a balanced edge in fast-changing segments,
particularly where technology risk and capital constraints are key concerns.
Exhibit 3: Comparison of buy vs
lease
OPEX-Focused KPIs for Sustainable Operational
Efficiency
As electronics manufacturers move toward asset-light models, the focus
naturally shifts from owning assets to maximizing the return on operations.
This requires a new set of performance metrics that track not just output, but capital efficiency. Exhibit 4 illustrates the OPEX-centric KPIs that are adopted by leading manufacturers to align financial agility with operational productivity.
Exhibit
4: OPEX focused KPIs
Conclusion
By shifting to capex-light
models and tightening WC, electronics manufacturers unlock more than just
liquidity - they create room for strategic reinvestment. The capital freed up
can be redirected into high-impact areas such as product R&D, digital
transformation, go-to-market expansion, and geographic diversification. Some
firms are also using this financial headroom to pursue partnerships, technology
upgrades, or D2C growth. Ultimately, the goal isn’t just to reduce cost - it’s
to reallocate capital where it delivers the most value. In a fast-changing
market, the next wave of industry leaders will be those who invest not in more
assets, but in smarter choices.
How Praxis can help
At Praxis, we help clients
unlock growth by optimizing their manufacturing and supply chain strategies. As shown in Exhibit 5, our work spans procurement restructuring, inventory reduction, and localization of key manufacturing activities. By benchmarking cost structures, identifying working capital unlock levers, and mapping asset-finance solutions, we support clients in building scalable, lean operations. Our proprietary frameworks and financial modelling tools enable clear visibility into capital efficiency improvements.
Exhibit 5: Capabilities we
build and implement
