Indian electronics makers turn to aluminium as copper costs squeeze margins

Indian electronics manufacturers are increasingly substituting aluminium for copper in key components as surging metal costs put pressure on margins.

Indian electronics manufacturers are turning to aluminium and steel as alternatives to copper as a sharp rise in copper prices pushes up production costs and squeezes operating margins.

Copper prices have climbed nearly 45 per cent year-on-year, prompting companies to pursue so-called value engineering across components such as motor windings, condenser coils and transformers. The shift towards lower-cost materials could reduce overall manufacturing costs by around 2 per cent to 6 per cent, according to the source.

The move comes as electronics companies face less room to pass higher input costs on to consumers. Several manufacturers have already seen operating margins decline from double-digit levels to single digits following multiple price increases since early 2026.

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Aluminium gains ground in cost-cutting push

For manufacturers, replacing copper with aluminium offers a way to reduce material costs without relying entirely on higher product prices.

The pressure on copper availability is also increasing. Demand from AI data centres and electric vehicle manufacturers has led these sectors to secure copper supplies months in advance, making it more difficult and expensive for conventional appliance makers to obtain the metal.

That is adding another incentive for electronics manufacturers to reassess the materials used in their products, with aluminium emerging as one of the alternatives being considered.

The success of the shift, however, will depend on whether manufacturers can achieve the targeted cost savings while maintaining the performance and reliability expected from their products.

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Local sourcing adds another layer

Material substitution is being accompanied by efforts to increase domestic manufacturing and reduce exposure to imported inputs.

Indian electronics companies are expanding local production to limit the impact of freight costs and currency fluctuations. PG Electroplast, for example, is preparing a new rotary compressor plant, while LG Electronics India is working to localise production of key resins and reduce import dependence.

For the wider electronics industry, the combination of aluminium substitution and greater local sourcing provides two routes to contain manufacturing costs as input prices remain elevated.

But manufacturers still face a delicate balance. Lower-cost designs must maintain durability and efficiency, particularly in a price-sensitive consumer market where any perceived deterioration in product quality could hurt demand and brand reputation.

At the same time, unseasonal weather has weighed on demand for cooling products, while cautious dealer inventory management is adding to the pressure on consumer durable sales.

For aluminium, the growing use of the metal in electronics therefore reflects not only its role as a copper alternative, but also manufacturers' broader effort to redesign products and supply chains around a more challenging cost environment.

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