Shares of Dixon Technologies (India) Ltd came under sustained selling pressure after Morgan Stanley reiterated its ‘Underweight’ rating, citing a sharp escalation in memory component prices that could strain profitability across the smartphone value chain. The stock fell more than 3 percent during Friday’s session, touching an intraday low of Rs 10,645 on the NSE, extending its losing streak to five consecutive sessions and taking the cumulative decline to over 9 percent.

The caution from global brokerages comes at a time when the memory market is witnessing a powerful upswing. Dynamic Random Access Memory (DRAM) spot prices as of mid-February 2026 were reported to be 6.8 times higher year-on-year. Prices for mobile DRAM components used in smartphones have also surged sharply in the current quarter, with LPDDR4 and LPDDR5 categories rising 55 percent and 64 percent quarter-on-quarter, respectively. Expect mobile DRAM prices to climb another 88–93 percent in the first quarter of calendar year 2026, followed by an additional 20–25 percent increase in the subsequent quarter.

This rapid cost escalation poses a structural challenge for electronics manufacturing services (EMS) providers such as Dixon, which assemble devices for major consumer brands. Unlike original equipment manufacturers that may have pricing power, contract manufacturers typically operate on thin margins and limited ability to pass through sudden component inflation.

Morgan Stanley’s target price of Rs 8,157 implies significant downside from current levels, reflecting concerns that margin compression could coincide with already subdued demand conditions. Nearly three-quarters of India’s smartphone market falls below the USD 300 price band, making it particularly sensitive to bill-of-materials inflation. Any attempt by brands to raise retail prices risks dampening volumes, while absorbing costs would squeeze profitability across the supply chain.

The cautious stance is not isolated. CLSA recently downgraded Dixon to ‘Hold’ from ‘Outperform’ and cut its target price sharply, pointing to a broader memory supercycle driven by artificial intelligence applications. The shift toward high-bandwidth memory and DDR5 for data-center and AI workloads has tightened supply of mainstream memory used in consumer electronics, exacerbating price pressures for handset manufacturers.

Other listed EMS players also saw declines, though less severe. Kaynes Technology India Ltd slipped about 1.15 percent, while PG Electroplast Ltd fell around 1.6 percent. The broad-based weakness suggests investors are pricing in sector-wide margin risks rather than company-specific issues.

From a market perspective, the development highlights a key vulnerability in India’s electronics manufacturing ecosystem: heavy dependence on imported semiconductor components. Despite policy incentives under the Production Linked Incentive (PLI) scheme, domestic value addition remains limited in high-end components such as memory chips. As a result, global supply cycles directly influence the cost structure of Indian manufacturers.

The timing is also significant. India has been positioning itself as a global alternative manufacturing hub amid supply chain diversification away from China. Sustained cost pressures could slow the pace of export growth or compress margins for companies that had benefited from operating leverage during the post-pandemic electronics boom.

Sectorally, the smartphone and consumer electronics segments face the most immediate impact. Entry-level and mid-range devices dominate the Indian market, leaving limited room for price increases without affecting demand. Premium segments may absorb higher costs more easily, but they represent a smaller share of volumes for domestic assembly players.