Wider adoption of electronic textiles requires integration of small electronic components into textile fabrics, without comprising the textile qualities. A solution is to create a flexible yarn that incorporates electronic components within the fibres of the yarn (E-yarn). The production of these novel E-yarns was initially a craft skill, with the inclusion of package dies within the fibres of the yarn taking about 90 min. The research described here demonstrated that it is possible to produce E-yarns on an industrial scale by automating the manufacturing process. This involved adapting printed circuit board manufacturing technology and textile yarn covering machinery. The production process started with re-flow soldering of package dies onto fine multi-strand copper wire. A carrier yarn was then placed in parallel with the copper wire to provide tensile strength. The package die and adjacent carrier yarn were then encapsulated in a polymer micro-pod to provide protection from moisture ingress and from mechanical strain on the die and solder joints. The process was then completed by surrounding the micro-pod and copper interconnects with additional fibres, held tightly together with a knitted fibre-sheath. This prototype, automated production process reduced the time for embedding one micro-device within a yarn to 6 min, thus increasing the production speed, demonstrating that automation of the E-yarn production process is feasible. Prototype garments have been created using E-yarns. Further developments can include automated transfer of the yarn components from one stage of production to the next, enabling greater increases in speed of manufacture of E yarns.