India’s electronics manufacturing sector is facing serious disruption following the government’s decision to restrict the import of gold compounds, further intensified by China’s earlier move to limit exports of rare earth magnets and capital goods.
The Directorate General of Foreign Trade (DGFT), in a notification dated June 17, reclassified imports of colloidal precious metals and compounds from the ‘free’ category to ‘restricted,’ effectively curbing access to critical materials such as Potassium Gold Cyanide (PGC). This compound, along with other gold-based materials, plays an essential role in electronics manufacturing, particularly in motherboards, semiconductors, connectors, and printed circuit boards (PCBs).
The India Cellular and Electronics Association (ICEA) has raised concerns with the Ministry of Electronics and Information Technology (MeitY), warning that the restriction is creating policy uncertainty and may stall investment in key sub-assembly sectors.
“The recent import restriction has affected the availability of this critical material,” ICEA Chairman Pankaj Mohindroo stated. “This has introduced uncertainty in light of ongoing efforts to scale up electronics manufacturing. The resulting policy unpredictability may also deter investment in critical sub-assembly segments where these inputs are essential.”
ICEA pointed out that the Electronics Component Manufacturing Scheme (ECMS) is specifically designed to encourage localization of vital components such as PCBs, connectors, camera modules, and mechanical parts, all of which rely on gold-based plating materials.
Echoing the industry’s alarm, the Electronic Industries Association of India (Elcina) has also appealed to MeitY, stating that customs authorities have begun holding up consignments of gold compounds like PGC, thereby causing production delays and disruptions in supply chains.
“These inputs are imported strictly for manufacturing purposes and are not diverted to the bullion or precious metal markets,” said Elcina Secretary General Rajoo Goel. “They are used in trace amounts and are essential to produce high-performance components, including semiconductors, connectors, and advanced PCBs.”
Elcina warned that the import restrictions could hinder the ease of doing business and threaten India’s key manufacturing initiatives such as the Production Linked Incentive (PLI) Scheme, ECMS, and Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS).
Indian electronics firms continue to grapple with the fallout from China’s decision in April 2024 to impose export licensing requirements on rare earth elements like terbium and dysprosium. These elements are essential for the production of high-performance NdFeB (Neodymium-Iron-Boron) magnets, which are used in a range of products including consumer electronics, electric vehicles, and medical devices.
Elcina estimates that the rare earth export restrictions threaten more than 21,000 jobs in Noida and southern India, particularly in the audio electronics segment.
Further compounding the crisis, electronics manufacturing services companies are also facing hurdles in importing specialized capital goods from China, leading to production slowdowns. Notably, iPhone manufacturer Foxconn was recently forced to send back hundreds of Chinese technology professionals who had been training Indian workers and assisting with capacity expansion.
Industry stakeholders are urging the Indian government to take immediate steps to address the situation, ensure the smooth import of essential inputs, and protect the momentum of domestic electronics manufacturing amid global supply chain shifts.
MOST READ | Pakistan, U.S. Finalize Trade Negotiations to Avert 29% Export Tariffs
