China+1 Strategy: Business and Sector Implications | Quick ₹eads

by Karnivesh | 15 January 2026

The Quiet Reshaping of Global Manufacturing

For 20 years, the rule was simple: "Design in California. Make in China."

Apple designed the iPhone in Cupertino. Foxconn built it in Shenzhen. The world bought it. Done.

But that era is ending. And it's happening faster than anyone expected.

In 2022, Apple made 5-7% of iPhones in India. By 2025, that number hit 20%. By end of 2026, it could be 30-40%. In just three years, India went from a minor assembly hub to Apple's second-largest iPhone production base after China.​

This isn't just about iPhones. It's about global manufacturing fundamentally reshaping. Every major company Samsung, Dell, Tesla, pharmaceutical giants is asking the same question: "How do we reduce dependence on China without losing scale?"

The answer is China+1. Keep some production in China. But diversify a chunk to another country. And that country is increasingly India.​

This shift will define which sectors boom in India over the next decade. And which investors get wealthy.​

What Is China+1? The Simple Version

China+1 = A company maintains production in China (because scale is still there). But it also invests heavily in another country to reduce geopolitical and supply chain risk.​

Why? Because relying 100% on China for manufacturing is dangerous:​

Geopolitical Risk: US-China trade war, tariffs, sanctions. Companies can't afford concentration risk.​

Supply Chain Risk: COVID shutdowns in Wuhan. US chip restrictions. One factory closure cripples the world. Companies learned this lesson hard.​

Rising Costs: Labor in China has gotten expensive. Factory capacity is saturated. Land prices are astronomical. India offers cheaper labor, available land, and government incentives.​

Regulatory Uncertainty: China's government can seize foreign assets (see Apple getting pressured on Foxconn's labor practices). India's government is actively courting foreign investment.​

So companies are shifting. Not abandoning China. But building a second manufacturing base elsewhere. India is winning this bet.​

The China+1 Shift: How Apple and Global Companies Are Rapidly Moving Production to India 

Apple's iPhone Pivot: The Biggest Manufacturing Shift in Decades

Apple is the story that explains everything about China+1.

In 2021, Apple made 95%+ of all iPhones in China. China was the only option. Decades of supplier relationships, infrastructure, expertise only China had it.​

But COVID happened. In November 2022, China's zero-COVID policy shut down Foxconn's Zhengzhou factory—which makes 30% of the world's iPhones. Global iPhone shipments were delayed. Apple's supply chain looked fragile.​

That moment changed everything. Tim Cook decided: "We need to make iPhones outside China."​

Where? Vietnam, Brazil, and Mexico were options. But India was the best choice:​

Huge young workforce: India has 500+ million working-age people. China's workforce is aging.​

Government incentives: India's Production Linked Incentive (PLI) scheme gives ₹100+ Crore subsidies to companies that manufacture electronics in India.​

Large domestic market: iPhone sales in India are growing 30%+ annually. Making phones in India means serving India with zero import taxes.​

Supplier ecosystem: Tata Group jumped in. Foxconn expanded. Pegatron opened facilities. Suppliers followed Apple to India.​

Result:​

• FY22: iPhone production in India = 5-7%

• FY24: iPhone production in India = 15%

• FY25: iPhone production in India = 20%

• FY26E: iPhone production in India = 25-30%

In just 3-4 years, India went from negligible to 1-in-5 iPhones. By 2027, it could be 1-in-2 iPhones.​

The scale: India exported ₹15,000 Crore worth of iPhones in FY25 alone. FY26 target is ₹16,000-17,000 Crore.​

One company (Apple). One product (iPhone). 2-3 lakh direct jobs created.​

Now imagine this happening across electronics, pharma, textiles, and auto components.​

Beyond Apple: Pharma, Electronics, and Textiles Are Next

Apple is the headline. But the real China+1 shift is happening quietly across sectors.​

Pharmaceuticals:​

Global pharma companies are worried about dependence on Chinese APIs (Active Pharmaceutical Ingredients). The US government's BIOSECURE Act is pushing companies to reduce China reliance.​

Result? Indian pharma companies are seeing a surge in RFQs (Requests for Quotations) from global clients wanting to diversify sourcing.​

Goldman Sachs research shows that large pharmaceutical companies are converting these RFQs into pilot projects and small contracts. Within 3-5 years, this could be ₹10,000+ Crore in new business.​

Electronics:​

India's PLI scheme for electronics has attracted $20 billion in investment for semiconductor and smartphone manufacturing.​

Intel, TSMC, and Vedanta are building fabs (chip fabrication units) in India. Samsung, Dell, and others are expanding assembly operations.​

India exported ₹1.47 Lakh Crore ($17.6 billion) in electronics in FY24. FY25 is projected at ₹1.85 Lakh Crore.​

Textiles:​

Vietnam dominance is slipping. Bangladesh's labor costs are rising. India has massive capacity, cheap labor, and the government's newly-increased tariffs on Chinese textiles.​

Global apparel brands are shifting production to Indian textile hubs. This sector could see ₹2-3 Lakh Crore in new investment over 5 years.​

Which Companies Win? Which Sectors Boom?

The Winners:

1. Apple suppliers (Tata Electronics, Foxconn India, Pegatron): Direct beneficiaries of the iPhone pivot.​

2. Semiconductor companies (Vedanta, Intel India operations): Getting PLI subsidies to build fabs.​

3. Pharma CDMOs and APIs manufacturers: Getting global contracts to replace Chinese sourcing.​

4. Textile and apparel manufacturers: Getting brand orders as companies diversify away from China.​

5. Logistics and port operators: More cargo volumes as export from India surge.​

6. Government (via jobs and tax revenue): 2-3 lakh jobs created just from Apple. Thousands more from pharma, electronics, textiles.​

The Sector Implications:

Electronics manufacturing: Boom. Growing 40%+ annually due to China+1.​

Pharmaceutical APIs: Gradual but significant shift. 3-5 year timeline before major impact.​

Textiles: Medium-term opportunity. Labor cost advantage attracting brands.​

Auto components: Opportunity. Tier 2 suppliers to global OEMs shifting to India.​

Infrastructure and logistics: Supporting boom. Ports, warehouses, transport all getting more cargo.​

The Trap: China+1 Is Not "Replacing China"

Here's what investors often get wrong: China+1 doesn't mean companies are leaving China. It means they're diversifying.​

Apple still makes 70%+ of iPhones in China. China still makes the chips, batteries, and most components. India is just assembly and final manufacturing.​

This is important because:

Chinese suppliers still win: Chipset makers, battery makers, component makers—still mostly China.​

India doesn't get the entire value chain: India gets assembly jobs, not design jobs. Profit margins are lower than component manufacturing.​

China remains critical: Even with India ramping up, any disruption in China still impacts global supply.​

So China+1 is not "China becomes less important." It's "China remains dominant, but India gets a meaningful slice.".​

The Lesson

China+1 is the structural tailwind driving India's manufacturing boom for the next 10 years.​

Companies directly benefiting from the shift (Tata Electronics, Vedanta, pharma CDMOs, textile manufacturers) will see exponential growth.​

Companies in supporting sectors (logistics, ports, industrial land, temp staffing) will benefit from volume growth.​

The broader Indian economy benefits from jobs, export revenue, and foreign direct investment.​

But here's the catch: This shift is structural, but benefits are unequally distributed.​

Apple's $20 billion investment in India is phenomenal. But it flows to three companies (Tata, Foxconn, Pegatron) and five states (Tamil Nadu, Karnataka, Gujarat, Telangana, Maharashtra).​

Other regions, other sectors, other companies will be left behind.​

The investor's job is identifying which companies, which sectors, which regions will actually capture the China+1 opportunity. Because not everyone will.​

The ones that do? They'll compound at 20-30% for a decade. That's where the wealth gets created.