Why India hasn’t won the “China Plus One” race, and who has
21 Dec 20257 min read
Summary
- ASEAN drew US$226 billion of foreign direct investment in 2024, up 8 per cent, according to the ASEAN Investment Report 2025.
- India had paid only US$1.73 billion of incentives under its US$23 billion Production Linked Incentive programme by October 2024, India Today reported, citing Reuters.
- Made-in-India smartphones were 44 per cent of US smartphone imports in the second quarter of 2025, according to Canalys, but many Indian goods faced 50 per cent US tariffs from 27 August 2025, Al Jazeera reported.
Southeast Asia drew more of the investment moving out of China than India did in the years to 2025, in VCA’s assessment. Total foreign direct investment (FDI) into the Association of Southeast Asian Nations (ASEAN) rose 8 per cent to US$226 billion in 2024, according to the ASEAN Investment Report 2025, published by the ASEAN Secretariat and UN Trade and Development (UNCTAD) in October 2025.
The report found ASEAN was the leading recipient of FDI among developing regions for the fourth consecutive year. David Hill, chief executive of Deloitte Asia Pacific, described the strategy known as “China Plus One”, which VCA calls China+n, to Forbes India, the Indian edition of Forbes, in December 2024: companies “might build their next greenfield manufacturing facility in Vietnam, Malaysia or India, but they’re unlikely to withdraw from China.”
The report found ASEAN was the leading recipient of FDI among developing regions for the fourth consecutive year. David Hill, chief executive of Deloitte Asia Pacific, described the strategy known as “China Plus One”, which VCA calls China+n, to Forbes India, the Indian edition of Forbes, in December 2024: companies “might build their next greenfield manufacturing facility in Vietnam, Malaysia or India, but they’re unlikely to withdraw from China.”
Southeast Asia: where the new factories went
In 2023 Indonesia received about US$33 billion of greenfield (new-build) manufacturing FDI and Vietnam about US$16 billion, according to McKinsey analysis published in September 2024. McKinsey found greenfield manufacturing FDI into China fell 17 per cent between 2019 and 2023, while FDI to Southeast Asia rose by roughly 20 per cent.
Outbound mergers and acquisitions from China into Southeast Asia rose to US$7.02 billion in 2023 from US$1.12 billion in 2022, according to Mergermarket data published in May 2024 by the deal-intelligence provider ION Analytics. One caveat: more than 60 per cent of ASEAN’s 2024 inflows went to Singapore, led by large manufacturing projects and by FDI in finance, holding companies and research and development, the ASEAN report said.
PC maker Asus said at its second-quarter 2025 investor conference that over 90 per cent of its US-bound motherboard and PC production had moved out of China to Southeast Asian sites including Thailand, Vietnam and Indonesia, the US technology site Tom’s Hardware reported in August 2025. Chinese technology firms Luxshare and Goertek are expanding production in Vietnam, and their plants in Bac Ninh province make it part of Apple’s supply chain, according to Vietnam Briefing, a business publication supported by the professional services firm Dezan Shira & Associates, in April 2025. Malaysia had become the world’s sixth-largest semiconductor exporter, and Intel was building an advanced 3D chip packaging facility in Penang, the Singapore broadcaster CNA reported in April 2024.
Vietnam has also cut approval times: under Decree 19, in force from 10 February 2025, eligible projects in high-tech parks, industrial parks and other designated zones can obtain an investment licence in two weeks or less, a process that once took up to a year, according to Vietnam Briefing’s guide to the decree.
Outbound mergers and acquisitions from China into Southeast Asia rose to US$7.02 billion in 2023 from US$1.12 billion in 2022, according to Mergermarket data published in May 2024 by the deal-intelligence provider ION Analytics. One caveat: more than 60 per cent of ASEAN’s 2024 inflows went to Singapore, led by large manufacturing projects and by FDI in finance, holding companies and research and development, the ASEAN report said.
PC maker Asus said at its second-quarter 2025 investor conference that over 90 per cent of its US-bound motherboard and PC production had moved out of China to Southeast Asian sites including Thailand, Vietnam and Indonesia, the US technology site Tom’s Hardware reported in August 2025. Chinese technology firms Luxshare and Goertek are expanding production in Vietnam, and their plants in Bac Ninh province make it part of Apple’s supply chain, according to Vietnam Briefing, a business publication supported by the professional services firm Dezan Shira & Associates, in April 2025. Malaysia had become the world’s sixth-largest semiconductor exporter, and Intel was building an advanced 3D chip packaging facility in Penang, the Singapore broadcaster CNA reported in April 2024.
Vietnam has also cut approval times: under Decree 19, in force from 10 February 2025, eligible projects in high-tech parks, industrial parks and other designated zones can obtain an investment licence in two weeks or less, a process that once took up to a year, according to Vietnam Briefing’s guide to the decree.
India's gains in electronics assembly
Made-in-India smartphones accounted for 44 per cent of US smartphone imports in the second quarter of 2025, up from 13 per cent a year earlier, according to the technology market analyst Canalys. Sanyam Chaurasia, principal analyst at Canalys, said Apple largely drove the shift.
India’s Production Linked Incentive (PLI) schemes, launched in 2020, pay companies incentives on incremental sales of products made in India, according to the government investment agency Invest India. By March 2025 the 14 schemes had drawn investment of Rs 1.76 lakh crore (Rs 1.76 trillion) and created over 12 lakh (1.2 million) jobs, the government said, as reported by India’s Economic Times in June 2025.
India’s Production Linked Incentive (PLI) schemes, launched in 2020, pay companies incentives on incremental sales of products made in India, according to the government investment agency Invest India. By March 2025 the 14 schemes had drawn investment of Rs 1.76 lakh crore (Rs 1.76 trillion) and created over 12 lakh (1.2 million) jobs, the government said, as reported by India’s Economic Times in June 2025.
What held India back in 2025
Payouts lagged: as of October 2024 only US$1.73 billion in incentives had been paid under the US$23 billion programme, less than 8 per cent of allocated funds, the Indian news outlet India Today reported in March 2025, citing Reuters. The commerce ministry said in June 2025 that cumulative payouts had reached Rs 21,534 crore across 12 sectors, according to the Economic Times.
Assembly also depends on imports: India needs to import about 85 per cent of raw materials, including critical minerals, to make items such as smartphones and chips, and components such as integrated circuits and display panels often come from China, Deeplina Banerjee, a research scholar at the Asia Pacific Foundation of Canada, wrote in March 2024. Foreign corporations have traditionally complained about bureaucratic hurdles in India, she wrote, and state governments have offered their own tax incentives and land subsidies.
US trade policy added cost: from 27 August 2025 the United States raised tariffs on many Indian goods to 50 per cent, Al Jazeera reported, after a White House executive order of 6 August 2025 added a 25 per cent duty over India’s purchases of Russian oil. Pharmaceuticals and electronic goods were exempted, for now, from the additional tariffs, Al Jazeera reported. Thailand and Indonesia had secured a 19 per cent US tariff rate and Vietnam 20 per cent, Tom’s Hardware reported in August 2025.
Logistics was one area of improvement: India’s logistics cost had dropped to 7.97 per cent of GDP in 2023-24, according to a study by the Department for Promotion of Industry and Internal Trade and the National Council of Applied Economic Research that the government’s Press Information Bureau reported in November 2025.
Assembly also depends on imports: India needs to import about 85 per cent of raw materials, including critical minerals, to make items such as smartphones and chips, and components such as integrated circuits and display panels often come from China, Deeplina Banerjee, a research scholar at the Asia Pacific Foundation of Canada, wrote in March 2024. Foreign corporations have traditionally complained about bureaucratic hurdles in India, she wrote, and state governments have offered their own tax incentives and land subsidies.
US trade policy added cost: from 27 August 2025 the United States raised tariffs on many Indian goods to 50 per cent, Al Jazeera reported, after a White House executive order of 6 August 2025 added a 25 per cent duty over India’s purchases of Russian oil. Pharmaceuticals and electronic goods were exempted, for now, from the additional tariffs, Al Jazeera reported. Thailand and Indonesia had secured a 19 per cent US tariff rate and Vietnam 20 per cent, Tom’s Hardware reported in August 2025.
Logistics was one area of improvement: India’s logistics cost had dropped to 7.97 per cent of GDP in 2023-24, according to a study by the Department for Promotion of Industry and Internal Trade and the National Council of Applied Economic Research that the government’s Press Information Bureau reported in November 2025.
A partial winner at the end of 2025
VCA’s assessment is that India ends 2025 as a partial beneficiary of China+n. India was the leading manufacturing hub for smartphones sold in the US in the second quarter of 2025, Canalys said. In VCA’s view, Southeast Asia held the wider base of new factories and Chinese supplier investment. A manufacturer weighing India in December 2025 faced slow incentive payouts and, outside exempt categories, a 50 per cent US tariff. Can faster PLI payments turn India’s assembly share into a supplier base less reliant on Chinese components?
Correction, 23 September 2026: An earlier version of this article described US tariffs on India as a 25% increase on select exports; from 27 August 2025 most Indian goods faced tariffs of 50%. This has been corrected.
Correction, 27 September 2026: This article was revised to correct the following. The McKinsey source did not name Samsung or Apple suppliers moving to Vietnam, and that claim has been removed. A paraphrase attributed to Deloitte Asia Pacific chief executive David Hill about AI and green technology did not appear in the Forbes India interview and has been replaced with his published words. The PLI disbursement figure of US$1.73 billion dates from October 2024; the earlier version said early 2025. The 44 per cent share of US smartphone imports in the second quarter of 2025 covers Made-in-India smartphones of all brands; the earlier version described iPhones as “nearly half” of those imports. The PLI production figure has been removed, and references to auto components, pharmaceuticals, renewable energy and Huawei that the cited sources did not support have been removed. The East Coast Economic Corridor was wrongly described as running from Kolkata to Kanyakumari; that passage has been removed. Claims that Indian states act as semi-autonomous units for import rules and apply different tax regimes, and a claim about the Supply Chain Resilience Initiative and Act East policy, were not supported by their sources and have been removed. A statement attributed to the Asia Pacific Foundation of Canada linked to a VCA page and now links to the foundation’s report. A Vietnam single-window claim linked to a page about Decree 19/2025 and now describes that decree. Asus’s 90 per cent figure refers to US-bound production only. Links to search-engine results and broken pages have been replaced or removed, and typing errors have been fixed.
Update, 26 September 2026: The United States announced on 2 February 2026 that it would cut tariffs on Indian goods from 50 per cent to 18 per cent, and the additional 25 per cent tariff linked to Russian oil purchases was removed with effect from 7 February 2026, according to the law firm Morgan Lewis. The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act on 20 February 2026, according to the Atlantic Council. From 24 July 2026 products of India and Indonesia face a 10 per cent Section 301 tariff, and products of Vietnam and Thailand 12.5 per cent, according to the Office of the US Trade Representative.
Correction, 23 September 2026: An earlier version of this article described US tariffs on India as a 25% increase on select exports; from 27 August 2025 most Indian goods faced tariffs of 50%. This has been corrected.
Correction, 27 September 2026: This article was revised to correct the following. The McKinsey source did not name Samsung or Apple suppliers moving to Vietnam, and that claim has been removed. A paraphrase attributed to Deloitte Asia Pacific chief executive David Hill about AI and green technology did not appear in the Forbes India interview and has been replaced with his published words. The PLI disbursement figure of US$1.73 billion dates from October 2024; the earlier version said early 2025. The 44 per cent share of US smartphone imports in the second quarter of 2025 covers Made-in-India smartphones of all brands; the earlier version described iPhones as “nearly half” of those imports. The PLI production figure has been removed, and references to auto components, pharmaceuticals, renewable energy and Huawei that the cited sources did not support have been removed. The East Coast Economic Corridor was wrongly described as running from Kolkata to Kanyakumari; that passage has been removed. Claims that Indian states act as semi-autonomous units for import rules and apply different tax regimes, and a claim about the Supply Chain Resilience Initiative and Act East policy, were not supported by their sources and have been removed. A statement attributed to the Asia Pacific Foundation of Canada linked to a VCA page and now links to the foundation’s report. A Vietnam single-window claim linked to a page about Decree 19/2025 and now describes that decree. Asus’s 90 per cent figure refers to US-bound production only. Links to search-engine results and broken pages have been replaced or removed, and typing errors have been fixed.
Update, 26 September 2026: The United States announced on 2 February 2026 that it would cut tariffs on Indian goods from 50 per cent to 18 per cent, and the additional 25 per cent tariff linked to Russian oil purchases was removed with effect from 7 February 2026, according to the law firm Morgan Lewis. The US Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act on 20 February 2026, according to the Atlantic Council. From 24 July 2026 products of India and Indonesia face a 10 per cent Section 301 tariff, and products of Vietnam and Thailand 12.5 per cent, according to the Office of the US Trade Representative.