The “China plus one” manufacturing strategy is yielding fewer gains than Southeast Asia initially anticipated, as regional infrastructure limitations, tightening manufacturing constraints, and eroding tariff advantages stall expected capital inflows. While countries like Vietnam and Thailand continue to attract billions in foreign direct investment, execution milestones and ecosystem readiness are proving to be major bottlenecks for industrial relocation.
The much-touted pivot away from mainland manufacturing is encountering severe friction on the ground. Despite ambitious projections, the structural realities of Southeast Asian industrial hubs are complicating the relocation playbook for global supply chain managers.
Why Is the Relocation Pattern Across Southeast Asia So Uneven?
The distribution of capital and factory footprints across Southeast Asia is heavily dependent on localized supply chain ecosystems rather than uniform regional growth. According to a report, Southeast Asia was projected by the World Bank to capture 25% of global manufacturing by 2026, pulling in an estimated $220 billion in manufacturing foreign direct investment led by Vietnam ($85B) and Thailand ($45B). However, this momentum is fragmented by country and specific product sectors.
Printed circuit board investments offer a clear window into this uneven topography. Industry updates indicate that total PCB capital expenditure in ASEAN nations reached approximately $4.8 billion in 2025, nearly triple the $1.7 billion recorded in 2022. Thailand has emerged as the leading destination for these investments, capturing roughly $2.3 billion in new facility announcements since 2024. Major industry moves highlight this specialized clustering, including Unimicron committing over $800 million to a new high-density interconnect and substrate facility in Thailand scheduled for late 2026 production.
How Do National Specializations Shape the Factory Shift?
Individual nations are carving out distinct niches rather than serving as interchangeable alternatives to Chinese manufacturing hubs. Malaysia is using its established semiconductor ecosystem in Penang and Johor to attract PCB manufacturers seeking close proximity to advanced chip packaging and assembly lines, with several major multilayer facilities breaking ground for automotive and industrial segments. Meanwhile, Indonesia is positioning itself as a broader beneficiary of the ASEAN foreign direct investment surge, offering massive domestic market scale alongside critical mineral resources essential for battery supply chains. Compeq has expanded its footprint in Vietnam with a $350 million Phase 2 project focusing on automotive multilayer boards, while AT&S accelerated its Kulim expansion in Malaysia with a €400 million injection for integrated circuit substrates.
What Are the Operational Realities Facing Procurement Teams?
For procurement and supply chain executives, the 2026 playbook has pivoted rapidly from announcing strategic intent to proving operational resilience. Trends analyses reveal that most large industrial manufacturers have completed their initial restructuring phases, which involved qualifying alternative sources, establishing secondary manufacturing sites, and setting up buffer inventory protocols. Execution is now judged strictly by site readiness, supplier qualification speed, and ramp-up timelines rather than simple geographic diversification.
These operational hurdles highlight why the broader “China plus one” narrative is facing a reality check. As global B2B e-commerce approaches $36 trillion and industrial robotics expands at a 10.5% compound annual growth rate through 2030, Southeast Asia must rapidly overcome its infrastructure and capability constraints to capture the long-term value manufacturers demand.
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