The Great Manufacturing Migration: Can India Win the Race Beyond China?

For nearly three decades, China served as the world’s factory floor. From electronics and machinery to chemicals and consumer goods, global supply chains became deeply dependent on Chinese manufacturing.

Today, that model is changing.

Geopolitical tensions, trade disputes, pandemic-related disruptions and rising labour costs have encouraged multinational corporations to diversify production beyond China. The resulting “China+1” strategy is often presented as a historic opportunity for India.

But there is a critical reality that is frequently overlooked.

India is not competing against China alone. It is competing against Vietnam, Thailand, Malaysia, Indonesia and Mexico, countries that are moving aggressively to capture global manufacturing investments.

The numbers illustrate the scale of the challenge.

According to the United Nations Conference on Trade and Development (UNCTAD), Vietnam attracted approximately US$38 billion in foreign direct investment commitments in 2024, driven largely by manufacturing and export-oriented industries. Global companies including Samsung, Apple suppliers, Intel and Foxconn have expanded their manufacturing footprint there.

Mexico has emerged as another major beneficiary. The nearshoring trend has encouraged companies supplying the United States market to shift production closer to North America. According to the World Bank and Mexican government data, manufacturing exports from Mexico now exceed US$600 billion annually, making it one of the world’s most integrated industrial economies.

India, meanwhile, possesses undeniable advantages.

A large domestic market, a young workforce, improving infrastructure and supportive government initiatives have strengthened its position. Production-Linked Incentive (PLI) schemes across sectors such as electronics, pharmaceuticals and solar manufacturing have attracted significant investments from global companies.

Apple’s growing manufacturing ecosystem offers perhaps the most visible example. Industry estimates suggest that India now accounts for a rapidly increasing share of global iPhone production, a remarkable shift from just a few years ago.

Yet attracting investment is only the first step. The real competition is determined by execution.

Infrastructure remains a decisive factor. Manufacturers do not merely compare labour costs; they compare logistics efficiency, port connectivity, customs processes and supply-chain reliability.

According to the World Bank’s latest Logistics Performance Index, countries that consistently attract export manufacturing investments tend to combine efficient transport networks with predictable trade facilitation systems.

Vietnam’s success illustrates this principle. Rather than attempting to build every industrial capability simultaneously, it developed focused export clusters, integrated industrial parks and strong trade relationships with major markets.

Scale represents another challenge.

Global buyers increasingly prefer suppliers capable of supporting large, multi-country demand. Many Indian SMEs possess world-class engineering capabilities but remain relatively small compared to competitors in East Asia. Building scale without compromising quality will become increasingly important if Indian manufacturers are to move beyond niche supplier status.

Policy consistency will also play a crucial role.

Investors making manufacturing decisions often plan for ten to twenty years. Stable regulations, predictable taxation and efficient approvals frequently influence investment decisions as much as incentive schemes.

The lesson from successful manufacturing economies is remarkably consistent. China built scale. Vietnam built export efficiency. Mexico leveraged geography. Malaysia specialised in high-value manufacturing.

India’s path will need to combine elements of all four.

The China+1 opportunity is real. Global supply chains are undoubtedly diversifying. But diversification alone does not guarantee that investments will flow automatically to India.

The next decade will not be decided by who leaves China.

It will be decided by who offers the most competitive alternative.

For Indian SMEs, that means the question is no longer whether the opportunity exists.

The question is whether they are ready when it arrives.