Customs ruling quietly zeroes duty on the guts of Sanmina's AI storage racks

A Chennai plant asked two questions in April

Sanmina▲+4.06% — Sanmina, up 4.06 percent today-SCI India builds storage servers at SIPCOT Oragadam, outside Chennai ¹. The joint venture of Reliance Strategic Business Ventures and Sanmina's Singapore arm holds a customer order for servers it has yet to build ¹. On April 21, 2026, it asked Mumbai's customs advance-rulings authority two questions↗: how five of its models should be classified, and whether their imported parts enter duty-free ¹. The ruling is public through the tax trade press ¹; no financial outlet appears to have noticed.

Nil duty on the parts, whichever way the box is classified

All five models land in tariff heading 8471 ¹. The two Crestone JBODs, 4U racks holding up to 102 3.5-inch drives on dual 1600-watt supplies, are storage units under 8471 70 90 ¹. La Jolla, Coronado and Mlk Mavericks carry server modules with their own processors, AMD▼−2.08% — AMD, down 2.08 percent today EPYC chips in two of them, and are processing units under 8471 50 00 ¹.

The split decided nothing about the money. Parts actually used to build all five enter at nil Basic Customs Duty under Serial No. 39 of Notification 24/2005, provided the plant follows the IGCR end-use rules ¹. Copper parts and solar glass stay excluded ¹.

The drives are the scarce part

Finished 8471 machines already cross India's border duty-free under the same notification ¹. The end-use route extends that to components for whoever assembles locally ¹. Importers of the same boards, chips and power supplies without an advance ruling and IGCR registration stay on the ordinary First Schedule rate: the carve-out runs through the assembler, not the import channel ¹.

Timing is why it matters. Seagate▲+0.60% — Seagate, up 0.60 percent today shipped 218 exabytes in its June quarter↗, 34% more than a year earlier, roughly 90% of it to data centers, and most of its nearline output is already allocated into calendar 2028 ²³. Western Digital's▲+0.35% — Western Digital, up 0.35 percent today finance chief framed the market in one line: "My revenue is not gated by the demand. My revenue is gated by the amount I can supply" ².

The ramp is already in the stock

Sanmina↗'s June quarter brought in $3.46 billion, up 69.7% year over year↗, on EPS of $3.31 against a $2.77 consensus ⁵. A year earlier the same quarter earned $1.53, and management now guides fiscal 2026 to $14.0 to $14.3 billion of revenue ⁶.

The shares have gained 46.2% this year, against Jabil at 31.4% and Celestica at 25.7%↗ ⁸. The ruling surfaced this week, after those gains were booked ¹.

The ruling has edges, and names no number

The order does not classify the individual inputs, whose position "remains subject to assessment" at the border ¹. Any configuration change, dropping the CPU-carrying server module for instance, voids it under Section 28J(3) ¹. No rupee figure appears anywhere in it, so the size of the duty saved is not on the record ¹.

The skeptics sit above the plant

Toshiba's roughly $380 million expansion adds about 75 exabytes against an industry shortage near 300, and Bernstein kept Buy ratings on Seagate at $1,350 and Western Digital at $770↗ anyway ²⁴. On Sanmina itself, the Street's average target of $198.33 sits 13.4% below the last close ⁵.

What to watch

Chennai's bills of entry and its IGCR-3 filings will show whether the duty route gets used, and the fiscal fourth-quarter print tests the raised year↗ ⁶. The drives are rationed into 2028; Mumbai just made the rack around them cheaper to build.