Indian Electronics Giant Syrma SGS Ventures into Laptop Motherboard Production
In a significant move that could reshape India's electronics manufacturing landscape, Syrma SGS Technology Ltd., the country's third-largest electronics manufacturing services (EMS) company, has revealed plans to commence production of laptop motherboards by fiscal year 2027. This strategic initiative aims to enhance profitability and qualify for government incentives under the Production-Linked Incentive (PLI) scheme.
Jasbir Singh Gujral, Managing Director of Syrma SGS, disclosed in an exclusive interview with Mint that the company is currently in advanced discussions with its existing partners, Taiwan's MSI and Japan's DynaBook (formerly Toshiba, now owned by Sharp), to localize motherboard manufacturing. Both companies already rely on Syrma SGS for laptop assembly operations in India.
Boosting Margins and Meeting PLI Requirements
The transition to motherboard manufacturing represents a crucial step up the value chain for the Mumbai-based company. Gujral emphasized that this move could potentially increase Syrma SGS's margins by 4-5% on its laptop assembly revenues, which stood at approximately ₹175 crore during the first half of fiscal year 2026.
"There are two additional benefits—one, it gives us higher value addition, and once I start motherboard assembling, IT hardware PLI kicks in," Gujral explained, highlighting that "only vanilla laptop assemblies do not attract PLIs." The financial impact is substantial, with the MD projecting an increase of at least ₹10 crore in margins on a half-yearly basis once motherboard production commences.
The central government's PLI scheme for IT hardware, notified in May 2023 as IT Hardware PLI 2.0, specifically requires companies to localize components rather than merely assembling finished products to qualify for incentives. Currently, Syrma SGS imports all laptop motherboards, making this domestic manufacturing initiative essential for accessing government support.
Pioneering Domestic Motherboard Manufacturing
Should Syrma SGS successfully implement its plans, the company will join a select group of Indian manufacturers venturing into computer motherboard production. The move positions Syrma SGS among the first domestic EMS companies to undertake this sophisticated manufacturing process, marking a significant advancement in India's electronics manufacturing capabilities.
The company isn't alone in recognizing this opportunity. In April, Optiemus Electronics announced a manufacturing partnership with Taiwan's ASRock for desktop computer motherboards. Meanwhile, China-based Lenovo revealed in November 2023 its intentions to manufacture motherboards for laptops and desktop computers sold in India through its Puducherry assembly line and partnership with Dixon Technologies.
Despite these developments, the space remains relatively untapped, presenting significant first-mover advantages for companies like Syrma SGS that commit to localizing this critical component.
Financial Performance and Expansion Plans
Syrma SGS, which went public in August 2022, has demonstrated robust financial performance recently. The company reported operating revenue of ₹1,146 crore in Q2FY26, representing a 20% sequential increase. Net profit saw an even more impressive jump of 33% sequentially to ₹66.3 crore in the September quarter.
However, the expansion comes with challenges. The company's gross margin declined by 1.6 percentage points, and net cash flow for the first six months of the year remained negative. Gujral addressed these concerns, stating that Syrma SGS aims to generate positive cash flow by the end of the current fiscal year.
"The most difficult part of controlling in a working capital cycle is the inventory and my inventories are well under control. It is the debtors that have gone up, and we're confident that with more persistent follow-up, we'll be able to bring the debt down and improve cash flow," Gujral explained, adding that inventory management remains under control despite working capital strains.
Broader Industry Context and Government Support
Syrma SGS's ambitious plans align with broader industry trends and government initiatives aimed at boosting electronics manufacturing in India. The company was among the first to receive approval for the Electronics Components Manufacturing Scheme (ECMS) on October 27, focusing on local production of printed circuit boards (PCBs) – a related but distinct initiative from the laptop motherboard plan.
Gujral outlined the timeline for PCB manufacturing, noting that trial production is targeted for January 2027, with commercial production expected to commence in FY28. The total project cost for PCB manufacturing is ₹765 crore, making the company eligible for incentives of approximately ₹380 crore based on capital expenditure.
The Indian electronics manufacturing sector has witnessed remarkable growth, with net electronics exports from India increasing by 33% year-on-year to reach $38.6 billion in FY25, according to an August 8 report by India Cellular and Electronics Association.
Market response to Syrma SGS's performance has been positive, with shares rising 2.85% to ₹831.05 following the earnings announcement. Since its IPO in August 2022, the company has delivered a 3.77x return to investors, significantly outperforming the BSE Sensex, which rose 43% during the same period.
As Syrma SGS navigates its expansion while managing cash flow concerns, analysts remain optimistic about the company's long-term prospects. Harshit Kapadia, Vice-President at Elara Capital, noted that deferment in cash flow quality is expected during rapid expansion phases, emphasizing that the company's overall financial health and strategic focus areas provide confidence for long-term investors.
