Top China Plus One Manufacturing Companies in India

Not long ago, the idea of Indian businesses competing with China seemed far-fetched.

However, over the past five years, there has been a significant shift in the global manufacturing landscape.

Multinational corporations like Apple and others have sought to de-risk from China, the world's 'factory floor', due to COVID-19-related disruptions and escalating US-China tensions.

To reduce their reliance on China, many companies have adopted a 'China plus one' (C+1) strategy.

This approach involves not abandoning China entirely but actively reducing its exposure by scaling back operations in the country.

As a result, within just a few years, many Indian companies have not only risen to compete with Chinese firms on a global scale but have also become symbols of indigenous manufacturing excellence.

In this article, we will explore the top China plus one manufacturing companies in India.

#1 Aurobindo Pharma

First on the list is Aurobindo Pharma.

Aurobindo Pharma is well-positioned to benefit from the China plus one strategy, gaining traction as global companies seek to diversify their supply chains away from China.

Aurobindo Pharma has already taken significant steps to reduce its dependence on Chinese raw materials, which are critical for pharmaceutical manufacturing.

By expanding its raw material sourcing from other countries and increasing its backward integration capabilities, the company is better insulated from supply chain disruptions.

As multinational pharmaceutical companies look to diversify their manufacturing bases, Aurobindo Pharma is likely to see increased demand for its contract manufacturing services.

The company's strong presence in key markets such as the US, Europe, and other emerging markets positions it as an attractive partner for global firms seeking to reduce their reliance on China.

Further, the Indian government's initiatives, including the Production-Linked Incentive (PLI) scheme for the pharmaceutical sector, provide Aurobindo Pharma with the financial backing to expand its manufacturing capabilities.

This support enhances the company's competitiveness on a global scale, allowing it to capture a larger share of the market.

Going forward, the company plans to focus on expanding its business in India and launching new products.

For more details, see the Aurobindo Pharma. company fact sheet and quarterly results

#2 Dixon Technologies

Next on the list is Dixon Technologies.

Dixon Technologies, a key player in India's electronics manufacturing landscape, has strategically positioned itself to benefit from the global shift under the China+ strategy.

As geopolitical tensions drive companies to diversify their manufacturing away from China, Dixon has capitalised on this trend, emerging as India's largest electronics contract manufacturer.

The company has effectively leveraged the Production-Linked Incentive (PLI) scheme, which coincided with the world's pivot away from China.

Dixon's recent acquisition of a majority stake in Ismartu India, a firm involved in electronics and mobile device manufacturing, underscores its expansion strategy.

Ismartu India, an arm of the Chinese company Transsion Technology, produces feature phones and smartphones for brands like Itel, Infinix, and Tecno at its three factories in Noida.

This acquisition further strengthens Dixon's foothold in the mobile phone manufacturing sector.

Since the launch of the PLI scheme in 2021, Dixon has consistently outperformed other domestic companies, becoming one of the leading mobile phone manufacturers in the country.

The company has met PLI targets and received incentives, solidifying its position in the industry.

Founded in 1994 with the production of colour televisions, Dixon has grown to operate 23 manufacturing plants across India, serving a diverse clientele that includes global giants like Samsung and Robert Bosch.

Dixon's manufacturing capabilities extend to smartphones for leading brands such as Xiaomi, Motorola, and Samsung, with a capacity of 30 million (m) smartphones and 50 m feature phones at its four plants in Noida.

Holding a 32% market share in mobile phone contract manufacturing, Dixon leads the industry, followed by competitors like Foxconn and DBG Group.

Going forward, it is planning to invest Rs 6,000 m in capex to set up a new factory for washing machines with a capacity of 2.4 m units.

For more details, see the Dixon Technologies company fact sheet and quarterly results.

#3 Deepak Nitrite

Next on the list is Deepak Nitrite.

Deepak Nitrite is strategically positioned to benefit from China plus one strategy, leveraging its strong market presence in basic and specialty chemicals.

In the basic chemicals segment, the company manufactures essential products such as nitrites, nitrogen toluidines, and fuel additives.

Deepak Nitrite commands a dominant market share, holding around 80% of the market for sodium nitrite, 50% for nitrotoluene, and 75% for fuel additives in FY21.

These products are crucial for a wide range of industries, including colourants, rubber chemicals, explosives, dyes, pigments, food colours, and pharmaceuticals.

In addition to its bulk chemicals, Deepak Nitrite excels in the speciality chemicals segment, where it produces niche, high-margin products that require advanced technical skills and sophisticated technology.

The company's portfolio includes speciality chemicals like xylidines, oximes, and cumidines, which are tailored to meet the specific needs of its customers.

These specialised products, although produced in smaller quantities, are integral to the agrochemical, pharmaceutical, and personal-care industries.

As global companies seek to diversify their supply chains away from China, Deepak Nitrite's strong market position in basic and speciality chemicals makes it an attractive alternative for sourcing critical materials.

The company's ability to cater to diverse industries, coupled with its expertise in handling complex chemical reactions, positions it to capture a larger share of the global market.

At present, the company is aiming to ramp up its production capacities to cater to the growing needs of its clients.

For this, it has invested over Rs 14 bn to acquire land parcels. Moreover, it is planning to invest Rs 40 bn to develop new products and acquire companies that are manufacturing some of its existing products.

For more details, see the Deepak Nitrite company fact sheet and quarterly results.

#4 KPR Mills

KPR Mill Ltd, one of India's largest textile manufacturers, is positioned for significant growth as the China-plus-one strategy increasingly favours Indian cloth producers.

Headquartered in Tamil Nadu, KPR Mill is a vertically integrated apparel brand and one of India's fastest-growing companies, specialising in ready-made knitted apparel, cotton-knitted fabric, and cotton yarn.

While many textile companies are expected to benefit from the China-plus-one strategy, KPR Mill stands out due to its vertical integration.

This approach allows the company to control various stages of the supply chain, reducing reliance on external suppliers and enhancing control over the production process.

As of August 2023, KPR Mill operates 12 technology-driven manufacturing units, with an annual production capacity of 104,000 MT of yarn, 25,000 MT of fabric, and 157 m ready-made knitted garments.

Additionally, the company has a fabric printing capacity of 15,000 MT. KPR Mill has also recently ventured into the retail market with FASO, a 100% organic brand offering innerwear, sportswear, and athleisure products.

The company's strong position in Europe, solidified even before India signed a Free Trade Agreement (FTA) with the region in March 2024, further enhances its competitiveness.

Despite the inherent volatility in the textile industry, KPR Mill has consistently maintained its EBITDA margins above 18-19%.

Beyond textiles, KPR Mill also operates in the sugar industry, with a production capacity of 20,000 TCD, an ethanol capacity of 360 KLPD, and a power generation capacity of 90 MW.

For more details, see the KPR Mill company fact sheet and quarterly results.

#5 Laurus Labs

Last on the list is Laurus Labs.

Laurus Labs is well-positioned to benefit from the China plus one strategy due to its strong focus on active pharmaceutical ingredients (APIs) and its growing capabilities in the pharmaceutical and biotechnology sectors.

Laurus Labs' expertise in producing lower-cost versions of brand-name drugs and its custom synthesis services make it an attractive alternative for multinational corporations.

The company's commitment to innovation, demonstrated by its advanced R&D efforts in areas like gene therapy and its groundbreaking ImmunoACT cancer therapy, further enhances its appeal.

Laurus Labs' strategic collaborations, including its joint venture with KRKA and a contract development and manufacturing organization (CDMO) agreement, position it to capitalise on the increasing demand for high-quality pharmaceutical products and services outside of China.

Going forward, it is also focusing on expanding its product portfolio. In line with this goal, it ventured into agrochemicals and animal health contract manufacturing.

Apart from this, the company is working on increasing the applications of new technologies to improve efficiency.

It has also made a few strategic investments in breakthrough technologies like gene therapy, cell therapy, and precision fermentation.

For more details, see the Laurus Labs company fact sheet and quarterly results.

Snapshot of Top China Plus One Company Stocks in India

Here's a quick view of top China plus one companies in India from Equitymaster's stock screener.

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Conclusion

Looking ahead, India's exports are projected to soar to US$ 835 bn by 2030, up from US$ 431 bn in 2023, driven by its robust domestic market, which is increasingly attracting firms seeking supply chain alternatives to China.

Media reports predict a 10% annual export growth over this period, with electronics emerging as the fastest-growing sector, achieving a CAGR of 24% and nearly tripling in value to US$ 83 bn by 2030.

India's strengths in IT/ITeS, pharmaceuticals, and metals position the country as an attractive destination for foreign companies aiming to de-risk their supply chains and reduce dependence on China.

Additionally, India enjoys a cost advantage in manufacturing, offering competitive wages and a vast pool of skilled labour, making it an appealing alternative for multinational corporations looking to cut costs.

The country is also poised to benefit from the Production Linked Incentive (PLI) initiative introduced by the government.

Programs like Make in India and the Skill India Mission are designed to enhance manufacturing capabilities and develop a skilled workforce, further boosting the prospects for China plus one manufacturing companies in India.

However, it is important for investors to conduct thorough research before making investment decisions.

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