How much production should actually leave China, and which parts of the supply chain are genuinely portable? These are the questions that heads of manufacturing and supply chain leads should be asking before committing the next tranche of production capacity to a new location.
In 2025, many didn’t get the chance to. A year later, some are moving back. The US-China trade war has been escalating since 2018, but the tariff pressure intensified sharply in 2025, with Trump announcing an additional 100% tariff on Chinese goods at one point. Companies moved fast, shifting their production to Vietnam, India, Indonesia, and Thailand. But a few companies have since returned: Target has moved some orders back to Chinese suppliers; Shein has scaled back Vietnam operations; an outdoor furniture exporter shut his Ho Chi Minh City workshop after discovering he had to import screws and cup holder molds from China, according to Reuters. Reuters noted that hard data on the scale of sourcing returning to China is not yet available. The cases are illustrative of a pattern, not evidence of a reversal at scale.
Many companies based their diversification decision on a framework that was missing three variables: supplier ecosystem depth, power reliability, and tariff arithmetic stability. As it turns out, alternative manufacturing hubs struggle to match China’s skilled labor, supplier networks, and reliable power.
The China+1 strategy—keeping production in China while building capacity elsewhere to reduce supply chain risk—is not being abandoned entirely, but there is a case to revise its execution. China’s manufacturing wages have increased, and are projected to keep rising. The cost advantages that made China the world’s factory floor are narrowing, and China itself is shifting toward higher-value manufacturing, automation, and AI-enabled production.
The space being vacated creates a genuine opening. China+1 has redirected growth toward markets that were previously crowded out, giving other economies a chance to build the industrial base that China’s dominance had limited. Take India, for example. Apple’s iPhone exports from India crossed US$23 billion in 2025, an 85% jump from 2024. India’s share of global iPhone production reached approximately 25% in 2025.
Against such a backdrop, these are the questions a COO or supply-chain lead needs to answer when reconsidering their China+1 strategy: how much production should actually leave China, which parts of the supply chain can realistically be replicated elsewhere, and whether the decision being made accounts for how these markets actually work on the ground.
What the Framework Misses
The China+1 decision framework weighs tariff differentials, labor costs, and logistics. Three additional variables need to be accounted for to determine whether a relocation actually works.
Supplier ecosystem depth. China’s component supplier networks took decades to build. It’s an ecosystem that’s not immediately replicable elsewhere. Vietnam, for example, operates on a “China for parts, Vietnam for assembly” model: finished goods ship from Vietnam, but the components feeding those lines still come from China. The outdoor furniture exporter who shut his Ho Chi Minh City workshop did so because basic inputs were unavailable locally.
Power and grid reliability. Manufacturers across Southeast and India have faced unstable electricity as a constraint. In Vietnam, the 2023 rolling blackouts across northern industrial zones—where Samsung and Foxconn operate—cost the economy an estimated US$1.4 billion, or 0.3% of GDP, according to the World Bank. In India, in the first quarter of 2026, the country lost 300GWh of already-generated renewable power because transmission infrastructure could not carry it to where it was needed, according to energy think tank Ember, as previously written.
Tariff arithmetic stability. In April 2025, the United States applied sweeping tariffs across nearly all trading partners: Vietnam at 46%, Thailand at 36%, Indonesia at 32%, Malaysia at 24%. The tariff differential that had justified relocating to those destinations narrowed overnight. Within months, most countries secured significantly reduced rates. But the episode demonstrated that a business case built on today’s tariff differential may not survive the next round of trade policy.
A Better Decision Framework
A COO or supply-chain lead should ask which country is best for this specific product, cost structure, compliance requirement, and supply chain objective, not which country is best overall. The answer should vary by product category.
A bill-of-materials analysis is the practical starting point. High-complexity, component-intensive products that depend on dense supplier ecosystems—electronics, precision manufacturing, EV components—should stay in or near China longer than low-complexity, labor-intensive assembly that can operate with simpler supply chains.
Assembly location and supply chain location are not the same thing. A product that still relies on Chinese components, tooling, or specialist suppliers has not reduced its China dependency; it has added a step. Whether the relocation actually delivered the risk reduction it was supposed to depends on how much of that underlying dependency moved, not where the product was finished.
The mistake to avoid is picking one alternative country and trying to move too much of the portfolio there. A well-structured China+1 strategy matches each product category to the region where it makes operational and economic sense.
Before committing, a COO or procurement head should stress-test the business case against realistic downside scenarios: the tariff differential narrows significantly, power supply proves less reliable than advertised, or a key component cannot be sourced locally. If the case does not hold under those conditions, the location or the category selection needs revisiting.
The transition itself is a process, not a switch. Supply chain leads who run both suppliers in parallel can avoid the unexpected disruptions. That is done by gradually shifting allocation as the new supplier proves it can hold consistency across full production cycles, rather than fully committing to a relocation in one step.
Country-by-Country Analysis
Each alternative manufacturing hub illustrates a different constraint on portability. None is a direct replacement for China.
Vietnam demonstrates the supplier ecosystem constraint most clearly. Its proximity to Shenzhen allows rapid transit of components, and its export-oriented ecosystem is mature for assembly-intensive products. But the constraint is structural: components still come from China. Industrial zone occupancy in major provinces hit 86 to 92 percent in 2025 and new entrants face a tighter market than companies that moved earlier. Vietnam works as a complement to China for assembly, not a replacement for it.
India illustrates the labor scale advantage alongside the infrastructure constraint. The aforementioned Apple’s iPhone export figures show what is possible at scale, the power reliability data shows what still limits it. For high-volume, labor-intensive manufacturing targeting the US market, India’s workforce depth gives it an advantage Vietnam cannot match over time. But domestic value-add in electronics is still maturing, and logistics and infrastructure quality varies significantly across states.
Indonesia shows where raw material advantage makes relocation viable. Battery materials processing is portable to Indonesia because the inputs are there. The country has attracted multi-billion dollar investment from LG Energy Solution, and CATL, both building battery plants there. Electronics are not portable to Indonesia in the same way, because the supplier ecosystem is not.
Thailand and Malaysia stand out for specialist capability niches. Thailand has developed depth in EV, battery, and automotive manufacturing. Malaysia accounts for approximately 13 percent of global semiconductor assembly, testing, and packaging. Neither is yet suitable for large-scale labor-intensive manufacturing. What works in these markets works because it matches a specific capability that exists there.
The pattern across all four destinations is the same: none is a direct replacement for China, and each works for a specific set of product categories and supply chain configurations.
China+1 is not primarily a country-selection exercise. It is a product-by-product assessment of which dependencies can actually move and which still need to remain anchored in China. The companies that got this right asked the harder question first: not where else can we make this, but what does making this actually require and how much of that still only exists in China.
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