Tag: supply chain diversification

For decades, global supply chains have been built around one priority: efficiency.
If you could reduce costs, increase speed, and, when needed, scale production, you’d win. And for many companies, especially in electronics, there was one clear answer to that equation: China.
But that model is now under pressure.
Geopolitics, tariffs, and supply chain disruptions have exposed a weakness that was easy to ignore when things were stable: efficiency doesn’t equal resilience.

Why China became dominant in electronics

China didn’t become the world’s manufacturing hub by accident.

Over 20+ years, it has built something very difficult to replicate: a complete manufacturing ecosystem.

• Dense supplier networks (from MCUs to displays, and from plastic enclosures to advanced coatings)
• Massive manufacturing capacity
• Skilled labour at scale
• Fast prototyping iterations, industrialization, and ramp-up

As the hosts of the PRG podcast put it in a recent episode:

“China has built the largest electronics manufacturing ecosystem in the world.”

That ecosystem is the key point. It’s not just about lower labor costs anymore. It’s about having everything, components, tooling, assembly, and testing, within a tight geographic cluster.

That’s why, for years, there was no question for many businesses about whether they’d manufacture in China; of course, they planned to do so.

What changed: from efficiency to risk management

Several events forced companies to rethink that approach:

• US–China trade tensions and tariffs
• Export controls on critical technologies
• COVID-era supply chain disruptions
• Rising logistics costs and delays

Many businesses discovered they were overly dependent on a single region. When that region was disrupted, production stalled.

As highlighted in the PRG podcast discussion:

“Single-region supply chains are really fragile.”

This shift is fundamental. Companies are no longer optimising only for cost; they are now balancing cost with risk, continuity, and flexibility.

China Plus One: misunderstood but essential

One of the most talked-about strategies today is China Plus One.

But it’s often misunderstood.

It does not mean leaving China.

In most cases, China plus one means:

• Keeping existing production in China
• Adding a second manufacturing location (e.g. Vietnam, India, Malaysia, Mexico)
• Gradually shifting a certain proportion of volumes (typically starting with new products, not existing ones) outside China

The goal is simple: reduce dependency without breaking what already works.

This matters because for many products, China remains the most practical option. Moving everything out is often unrealistic, especially for complex or high-volume electronics.

You might enjoy listening to: Manufacturing in China for the U.S. in 2026: Tariffs, China+1, and the Real Cost of Moving Production [Podcast]

The reality: diversification is harder than it sounds

While the strategy sounds straightforward, execution is not.

Large companies can diversify more easily. They already have:

• Global supplier networks, including some suppliers who can manage the relocation of production
• Procurement teams
• Volume leverage

Look at Apple’s rapidly expanding operations in India and Vietnam, for example.

However, startups and SMEs face a very different reality.

Limited budgets, lower volumes, and fewer resources make it difficult to build parallel supply chains. In some cases, attempting to diversify too early can increase cost and complexity without reducing overall risk.

There’s also a broader structural challenge.

Rebuilding manufacturing in regions like the US or Europe takes time, often decades. Skills, supplier networks, and infrastructure don’t appear overnight. Despite bringing manufacturing back to the USA being one of President Trump’s key wishes for his second term, the manufacturing jobs simply haven’t materialized yet (and analysts have doubts if they ever will, despite the political will).

What should companies do now?

There’s no universal solution, but a few principles are becoming clear:

1. Avoid having all of your eggs in one basket
   If one country, supplier, or component can stop your production, that becomes a risk worth addressing at some point.
2. Be selective about diversification
   Don’t move everything. Start with one product, see how things work out.
3. Think in regions, not countries
   Instead of replacing China with Vietnam, build a more regionalised model (Asia, Americas, Europe).
4. Align strategy with your scale
   What works for Apple won’t work for a startup. Your supply chain strategy must match your resources.

The supply chain shift

We are entering a different era of manufacturing.

For years, companies asked us three questions: How do we reduce costs? How do we cut lead times? How do we ensure there are no widespread quality issues?

Now they’re also asking a fourth question: How do we keep producing when things go wrong?

That’s a harder problem. And it requires a different mindset, where the more desirable supply chain is the durable one, not just the cheapest or most convenient.

Thinking about moving some production out of China? If it’s for electronics, we can help you do so to India or Malaysia.