India, Vietnam key beneficiaries of global supply chain shift due to China+1 strategy: Nomura

Global investment bank Nomura has estimated that the supply chain shift should raise India's export from $431 billion in 2023 to $835 billion by 2030, a CAGR (Compound Annual Growth Rate) of 10 percent.

Nomura's report is based on the empirical evidence of the China+1 strategy using top-down data and bottom-up evidence from a survey of around 130 firms, according to reports.

India's gains are partly owing to its large domestic consumer market, with a pipeline of projects across electronics -- mainly smartphones, automobiles, capital goods and semiconductor assembly and testing, the report said, adding that a majority of the investments into India are from US companies and developed Asia.

"In India, we see benefits for companies in electronics and semiconductors, autos, solar energy, pharmaceuticals and defence sectors," the report read.

"As corporate capex picks up, we believe the Indian corporate sector can sustain 12-17 percent earnings growth in the medium term," it added.

Highlighting that companies like Reliance Industries, Bharat Electronics, Exide and Sona BLW could benefit from this supply chain shift, the Nomura report says, "The government's production-linked incentive scheme via tax breaks and subsidies has been one pull factor, but India's own booming smartphone demand is as important in firms' decisions to relocate to India."

"Apple's assembly of 14 percent of its global iPhones in India in FY24 is set to rise further, while Foxconn has invested in the stakes of Karnataka and Tamil Nadu to set up new manufacturing plants for components," the report noted.

Pointing out that firms investing in India's automobile sector are doing so partly due to the country's large domestic consumer base, Nomura report says, "India is already an important player globally in textiles, and firms like South Korea's Youngone are looking to build 12 factories in India to diversify their investment destination."

"India has also attracted interest from US-based firms Micron and Silicon Power Corporation to build a semiconductor assembly and testing plant, while AMD will invest to open a new design centre in Karnataka's Bengaluru," the report added.

Nomura says Vietnam, the other key beneficiary of the supply chain shift, is expected to see investments in automobiles (EV), electronics (PCs), energy (solar panel), and other important sectors such as shipping containers and chemicals to lift the country's exports from $353 billion in 2023 to $750 billion by 2030, a CAGR of 11.4 percent.

According to the report, Mexico, Thailand and Indonesia and the Philippines are some of the other countries that are expected to benefit from the global supply chain shift due to international corporations' China+1 strategy.