• Of the five hundred executive-level U.S. managers surveyed by market analysis OnePoll, 61% mentioned they might decide India over China if each may manufacture the identical supplies.
• The survey confirmed that 59% of the respondents discovered it “somewhat risky” or “very risky” to supply supplies from China, in contrast with 39% for India.
• “Companies are seeing India as a long-term investment strategy as opposed to a short-term pivot to avoid tariffs,” mentioned Samir Kapadia, CEO of India Index and managing principal at Vongel Group. 

U.S. companies are more and more viewing China as a dangerous guess for his or her provide chains — neighbor India is about to profit as corporations look elsewhere to set store.

As many as 61% of the five hundred executive-level U.S. managers surveyed by UK market analysis OnePoll mentioned they might decide India over China if each international locations may manufacture the identical supplies, whereas 56% most popular India to serve their provide chain wants throughout the subsequent 5 years over China.

The survey confirmed that 59% of the respondents discovered it “somewhat risky” or “very risky” to supply supplies from China, in contrast with 39% for India. 

At least 1 / 4 of the executives who participated within the unbiased, third celebration survey, commissioned by market India Index in December, don’t presently import from both China or India. 

“Companies are seeing India as a long-term investment strategy as opposed to a short-term pivot to avoid tariffs,” mentioned Samir Kapadia, CEO of India Index and managing principal at Vongel Group, in an unique interview with CNBC. 

Warming ties between the U.S. and India, spearheaded by President Joe Biden and Prime Minister Narendra Modi, with the previous’s “friendshoring” coverage aimed toward encouraging U.S. corporations to diversify away from China have additionally made India a gorgeous various. 

The relationship between the 2 international locations entered a brand new chapter with Modi’s state go to to the White House in June the place a slew of deals on giant collaborations in protection, expertise and provide chain diversification had been signed.

“The U.S. and China continue to sit in rather chilling air. Whereas there is a constant stream of iterations, conversations, dialogues and agreements between U.S. and India,” Kapadia mentioned. 

India has seen a flurry of bulletins about investments into the nation within the latest previous.

Earlier this month, Maruti Suzuki, introduced that it might make investments $4.2 billion to construct a second manufacturing unit within the nation. Vietnamese electrical auto maker VinFast additionally mentioned in January that it goals to spend round $2 billion to arrange a manufacturing unit in India.

Risks nonetheless stay

Despite the optimism, U.S. companies are nonetheless cautious of India’s provide chain capabilities.

The survey confirmed that 55% of the respondents discovered high quality assurance was a “medium risk” they could face if they’ve factories in India.

In September, Apple provider Pegatron needed to temporarily cease operations at its manufacturing unit within the Chengalpattu space close to Chennai after a fireplace broke out.

Delivery danger (48%) and IP theft (48%) had been additionally a fear for U.S. companies India. 

Other companies trying to absolutely or partially transfer their provide chains to India might not be capable to duplicate Apple‘s quick presence within the nation, warned Amitendu Palit, senior analysis fellow and analysis lead of commerce and economics on the Institute of South Asian Studies. 

“What Apple has done will not be able to be done immediately and as quickly by many other companies. Apple has the capacity to create an ecosystem much faster than other companies, so time must be factored in,” Palit informed CNBC in a Zoom interview. 

Both Palit and Kapadia agreed that fully shifting provide chains away from China won’t be attainable. 

“I don’t think China will ever be taken out of the equation,” Kapadia mentioned. “The reality is that China will always be a cornerstone of U.S. supply chain strategy.” 

Investments into China nonetheless stay strong and it’s nonetheless the “second choice” for investments after the U.S., mentioned Raymund Chao, Asia-Pacific and China chairman at PwC.

Vietnam the subsequent finest guess?

Similar to India, Vietnam has been additionally been possibility on traders’ minds when adopting a “China plus one” technique. 

The optimism within the Vietnamese market led to a greater than 14% surge in overseas direct investments final 12 months in contrast with 2022.

According to LSEG information, $29 billion in overseas direct investments had been pledged to Vietnam from January to November final 12 months. 

But Vietnam will be unable to realize what India can, Kapadia identified, explaining that the world’s most populous nation has entry to “a very large customer base that Vietnam doesn’t offer.” 

“Companies are not making these decisions for cost arbitrage. They’re making these decisions for cost savings and access to markets. You’re not going to see that same sort of benefit in just shifting to Vietnam,” he added