India–ASEAN Manufacturing: The Case for Building Beyond China's Shadow

China+1 will remain a limited opportunity if India and ASEAN compete to inherit China’s factories instead of building the supply chains of the future. By combining India’s industrial scale and technological capabilities with ASEAN’s established manufacturing networks, the two sides can turn a global shift in production into a lasting regional economic advantage.

India and ASEAN have spent years as neighbours in geography. It is time they became partners on the factory floor. As multinational companies reassess their dependence on China, a significant opportunity is emerging for both sides to reshape their economic relationship around shared manufacturing capabilities. What begins as a search for alternatives to China could eventually create a new manufacturing geography for the Indo-Pacific.

The global China+1 strategy has encouraged businesses to diversify their production bases and reduce their dependence on a single manufacturing destination. For India and ASEAN, however, the opportunity extends beyond attracting factories relocating from China. Their larger objective should be to develop an integrated production network in which different economies contribute specialised capabilities, allowing manufacturers to distribute production across borders while retaining access to established supplier networks and wider markets.

The challenge lies in moving beyond the traditional competition for foreign investment. Rather than positioning themselves as separate alternatives to China, India and ASEAN must recognise that their respective industrial strengths could become considerably more valuable when connected through a common manufacturing strategy.

From Investment Competition to Collective Manufacturing Strength

The China+1 strategy is often understood as an opportunity for individual countries to attract companies diversifying their manufacturing operations beyond China. While this approach has encouraged investment promotion across Asia, it also carries the risk of countries competing for similar industries and duplicating manufacturing capacities instead of developing complementary capabilities.

An article published by India Narrative argues that China+1 should evolve into a shared India–ASEAN production network rather than remain a competition between individual economies. This proposition draws support from a study conducted by the Economic Research Institute for ASEAN and East Asia (ERIA), which identifies ASEAN’s relatively strong connections with global production networks while pointing to considerable scope for improving India’s integration into global value chains. Greater cross-regional investment could help address this imbalance by connecting the industrial strengths of both sides.

The economic logic is simple. Modern manufacturing depends on connecting specialised production capabilities across different locations rather than concentrating every stage within one country. India offers a large domestic market and considerable industrial potential, while ASEAN brings established supplier networks, developed ports and extensive export experience. Connecting these advantages could allow components to be manufactured in one economy, processed in another and assembled at the most competitive location.

Such an arrangement would improve the region’s collective manufacturing competitiveness while giving multinational companies greater flexibility in organising their production networks. The objective should therefore be to attract investments that create wider industrial linkages rather than simply increase the number of factories established within individual countries.

Building the Supply Chains That China+1 Needs

Turning this opportunity into an operational strategy requires identifying where India and ASEAN can complement each other across the manufacturing value chain. A cross-regional supply chain map would provide a useful starting point by identifying priority industries, gaps in supplier networks and the most competitive locations for different stages of production. It would also help businesses identify where investment can generate greater value across the region.

Electronics, semiconductors, electric vehicle batteries, pharmaceuticals and industrial machinery offer promising areas for cooperation because their production processes depend on specialised components and reliable suppliers. Electronics and semiconductor manufacturing, for instance, involve activities ranging from engineering and component production to fabrication, assembly and testing. India could expand its contribution through design, engineering and selected component manufacturing, while ASEAN economies with established electronics industries could provide additional production capabilities.

The electric vehicle sector presents another significant opportunity, particularly as demand for battery materials and associated technologies continues to expand. Indonesia’s nickel-processing industry demonstrates how control over critical raw materials can become a foundation for downstream manufacturing. For India, which is seeking to strengthen its battery ecosystem, closer industrial engagement with Indonesia could create opportunities extending beyond mineral procurement towards battery materials and related manufacturing capabilities.

Pharmaceuticals and industrial machinery could similarly benefit from stronger supplier connections and greater manufacturing cooperation. However, identifying promising industries will achieve little unless the trade arrangements between India and ASEAN facilitate the movement of intermediate goods across borders. Existing frameworks must support interconnected production processes rather than focus primarily on trade in finished products.

India’s Industrial Scale Needs a Regional Purpose

India’s participation in a shared production network will depend on its ability to strengthen manufacturing competitiveness while making its industrial environment more attractive to long-term investors. Its large domestic market provides an important advantage, allowing manufacturers to achieve production scale while using the country as a base for accessing wider markets.

Nevertheless, market size alone cannot guarantee a larger role in global manufacturing. Companies establishing production facilities across several economies require predictable regulations and an efficient business environment that allows them to make long-term investment decisions. India must continue improving these conditions if it wants to become a more dependable partner within regional manufacturing networks.

India can also expand its contribution beyond conventional manufacturing activities. Its capabilities in design, engineering and industrial software offer opportunities to occupy more valuable stages of the production process. Strengthening these areas alongside selected component manufacturing could position India as an important centre for industrial innovation within the wider India–ASEAN ecosystem.

This would also help address the challenge identified by the ERIA study regarding India’s relatively limited integration into global value chains. Greater participation in cross-border manufacturing networks would enable Indian businesses to connect with established suppliers and acquire technological expertise, making them more competitive in international markets.

ASEAN’s Established Networks Are India’s Missing Link

ASEAN’s contribution to this partnership lies in its established position within global production networks and the specialised industrial capabilities of its member economies. Its export-oriented manufacturing industries, supported by developed ports and industrial zones, provide an important foundation for connecting Indian manufacturers with wider East Asian and Pacific markets.

The individual economies also bring distinct advantages. Indonesia’s critical mineral resources and downstream industrial development make it particularly relevant to electric vehicle supply chains, while Malaysia’s semiconductor and electronics capabilities offer opportunities for deeper technological cooperation. Thailand’s established automotive industry could complement India’s expanding manufacturing base, while Vietnam’s electronics manufacturing capabilities provide another important link in the regional production network.

These strengths demonstrate why a coordinated approach could deliver greater benefits than separate national investment strategies. Each economy can contribute where it already possesses competitive advantages, allowing businesses to distribute production more efficiently without having to recreate entire supply chains within a single country.

Realising this potential will require better connectivity between ASEAN’s industrial centres and Indian supplier networks. Greater coordination on industrial standards and improved links between regional ports and manufacturing zones would help businesses distribute production activities across different locations without facing unnecessary logistical costs. Without such connections, the industrial strengths of both sides will remain valuable but fragmented assets.

Trade Facilitation Will Decide the Outcome

Manufacturing integration cannot advance faster than the trade arrangements supporting it. Production networks depend on the predictable movement of raw materials and intermediate goods across borders, often through several stages of manufacturing. Customs delays, inconsistent standards and regulatory uncertainties can quickly erode the cost advantages that encourage companies to distribute production across multiple economies.

India and ASEAN must therefore ensure that their trade frameworks reflect the changing requirements of modern manufacturing. Greater attention should be given to facilitating intermediate-goods trade and improving customs procedures, while closer coordination on relevant industrial standards would make cross-border production more commercially viable.

Investment promotion also needs a more coordinated approach. Instead of approaching multinational companies independently, India and ASEAN could present themselves as an integrated manufacturing destination with complementary industrial capabilities and access to multiple markets. This would allow investors to evaluate opportunities across an entire production chain rather than focus exclusively on the incentives offered by individual countries.

Such cooperation would require sustained political commitment alongside closer engagement between governments and businesses. Manufacturing integration cannot be achieved through investment announcements alone, as companies must have practical reasons to establish supplier relationships and distribute production across borders. The success of this strategy will ultimately depend on whether the region can make cross-border manufacturing simpler and more competitive than operating through disconnected national production systems.

From China’s Alternative to the Indo-Pacific’s Advantage

The global China+1 strategy offers India and ASEAN an opportunity to reshape their economic relationship around manufacturing integration and deeper participation in global value chains. Yet, attracting factories will provide only an initial advantage. The more enduring gains will emerge when businesses can distribute production across the region and benefit from the industrial capabilities of multiple economies.

India brings the scale, technological potential and industrial capacity required to support a larger regional manufacturing ecosystem, while ASEAN contributes established supplier networks and specialised manufacturing capabilities. Connecting these strengths could create a partnership in which the competitiveness of one economy reinforces that of another, allowing the wider region to become more attractive to global manufacturers.

The larger objective should be to make India and ASEAN indispensable parts of a common manufacturing network rather than competing destinations for the same investments. This would require a regional approach to industrial planning, trade facilitation and investment cooperation, supported by the willingness to treat manufacturing competitiveness as a shared economic objective.

As multinational companies reconsider where their products are made, the Indo-Pacific has an opportunity to shape the next phase of global manufacturing. India and ASEAN can either compete over the factories leaving China or build the industrial connections that make the entire region more valuable to global manufacturers. China’s manufacturing position was built over decades through extensive supplier networks and an integrated industrial ecosystem. Developing a credible alternative will require the same attention to industrial connections and long-term competitiveness.

The success of China+1 will be determined by how effectively India and ASEAN build a manufacturing network that neither could establish as efficiently on its own.