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Steve Watson
Johnny Chan
Anirudha Dutta
Apple’s recent announcement that it will manufacture the latest iPhone 14 model in India has added further fuel to a growing China Plus One narrative.
In short, this is where global businesses are avoiding investing solely in China to re-orient and diversify their supply chains.
From an investment perspective, it will be important to gauge how far, and how quickly, this shift might affect “the world’s factory”, as well as the opportunity it potentially opens for India and other countries well-placed to assume part of the global supply burden.
Key for India, as it has been for China over the years, is the sheer scale of potential domestic demand, with a huge local market making the decision to set up manufacturing hubs in the country easier.
This is why India is a different proposition to other options such as Indonesia, Thailand and Vietnam, which are dwarfed in population terms by China. In contrast, India is currently the world’s second most populous nation (home to 1.417 billion people in 2022, compared with China’s 1.426 billion) but could take the top spot as early as this year, according to UN forecasts1.
Shifting demographics
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As at October 2022. Figures from 2023 onwards are International Monetary Fund (IMF) estimates. Source: IMF
From China’s perspective, Capital Group specialists in the region agree that the Plus One effect will happen very slowly despite current headlines pointing loudly in that direction.
Despite a push for supply chain diversification, China continues to see huge foreign direct investment, with its manufacturing infrastructure, logistics facilities and skilled labour hard to move away from in the short term.
1. Source: United Nations, World Population Prospects 2022
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