India, followed by Vietnam, are the biggest beneficiaries of the shifts in global supply chains due to the China+1 strategy adopted by transnational corporations, a report from equity research and rating firm Nomura has said. Nomura estimates that this shift should raise India’s exports from $431 billion in 2023 to $835 billion by 2030, a CAGR of 10%.
Nomura’s observations are based on the empirical evidence of the China + 1 strategy using top-down data and bottom-up evidence from a survey of around 130 firms.
India’s gains are partly owing to its large domestic consumer market, with a pipeline of projects across electronics (smartphones), automobiles, capital goods and semiconductor assembly and testing, the report said. A majority of the investments into India are from US companies and developed Asia.
“In India, we see benefits for companies in electronics and semiconductors, autos, solar energy, pharmaceuticals and defence sectors. As corporate capex picks up, we believe the Indian corporate sector can sustain 12-17% earnings growth in the medium term”, Nomura says.
The report highlights that companies like Reliance Industries, Bharat Electronics, Exide and Sona BLW could benefit from this supply chain shift. “The government’s production-linked incentive scheme via tax breaks and subsidies has been one pull factor, but India’s own booming smartphone demand is as important in firms’ decisions to relocate to India. Apple’s assembly of 14% of its global iPhones in India in FY24 is set to rise further. Foxconn has invested in the states of Karnataka and Tamil Nadu to set up new manufacturing plants for components”, the report notes.
It also points out that firms investing in the automobile sector in India – such as VinFast – are doing so partly due to India’s large domestic consumer base. “India is already an important player globally in textiles, and firms like South Korea’s Youngone are looking to build 12 factories in India to diversify their investment destination. India has also attracted interest from US-based firms Micron and Silicon Power Corporation to build a semiconductor assembly and testing plant, while AMD will invest to open a new design centre in Bangalore”, the report says.
Vietnam, the other key beneficiary is expected to see investments in automobiles (EV), electronics (PCs), energy (solar panel) and other sectors like shipping containers and chemicals to lift that country’s exports from $ 353 billion in 2023 to $ 750 billion by 2030, a CAGR of 11.4%, Nomura says. Mexico, Thailand, Indonesia and the Philippines are some of the other countries that are expected to benefit from the China + 1 strategy of global corporations.
