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China plus one and semiconductors
China Plus One describes how companies are diversifying supply chains beyond China to reduce concentration risk. This page explains the strategy in plain terms, how it applies to semiconductors, and where India, including sites like Dholera, fits, while being honest about India's early stage and the limits of the trend.
Last checked 2026-08-11 · every figure below carries its source
What China Plus One means
China Plus One is a widely used business strategy in which companies keep their existing operations in China but add manufacturing or sourcing in at least one other country to spread risk. The logic is about resilience rather than exit. Over recent decades, global supply chains concentrated heavily in China because of its scale, infrastructure, and cost efficiency. That concentration proved efficient in normal times but risky when disruptions occurred, whether from trade tensions, pandemic shutdowns, or shifting policy. Adding a second location gives firms an alternative if one source is disrupted. The trend gained momentum as companies and governments grew more cautious about depending on any single country for critical goods. It is important to be measured about this. China Plus One is a gradual reallocation and hedging strategy, not a wholesale relocation, and China remains a central part of most supply chains. Countries such as India, Vietnam, and others have positioned themselves as candidate destinations for the additional capacity, competing on cost, talent, incentives, and infrastructure. Understanding the strategy this way keeps expectations realistic rather than treating it as a sudden shift away from any one economy.
Why it matters for chips
Semiconductors are a special case within the China Plus One conversation because their supply chain is both globally distributed and heavily concentrated at certain stages. Leading-edge fabrication is dominated by a small number of players, with Taiwan holding the largest share through firms like TSMC, while assembly, test, and packaging and various component steps are spread across several economies including China. The 2020 to 2022 chip shortage and rising geopolitical tension made this concentration a visible risk, prompting companies and governments to seek more diverse and resilient chip supply. For chips, diversification is harder than for many other goods because fabs require enormous capital, specialised equipment, ultrapure water, large volumes of electricity, and years to build and reach reliable yields. That means China Plus One in semiconductors plays out slowly and selectively, often starting with back-end packaging and mature-node fabrication rather than the most advanced processes. Countries hoping to benefit must offer not just incentives but genuine infrastructure and a growing talent base. This is precisely why new entrants tend to begin at the mature-node and packaging tiers, where the barriers, while still high, are more surmountable than at the leading edge.
Where India positions itself
India presents itself as a natural China Plus One destination, pointing to its large domestic market, engineering workforce, and government incentives. In semiconductors specifically, this ambition is expressed through the India Semiconductor Mission, launched in 2021 with an outlay of about Rs 76,000 crore, offering fiscal support of up to 50 percent of eligible project cost for approved fabs. The Tata Electronics and PSMC fab at Dholera, approved on 29 February 2024, is the flagship, targeting mature and specialty nodes such as 28, 40, 55, 90, and 110 nanometres, alongside packaging plants such as Micron at Sanand and Tata at Jagiroad. This mix aligns with how China Plus One typically works in chips, starting with mature nodes and back-end packaging rather than the frontier. India-wide, there are around a dozen sanctioned semiconductor projects with a cumulative value on the order of Rs 1.64 lakh crore, a national total that should not be attributed to any single site. The honest position is that India is a credible candidate that is early in execution. Attracting diversified investment is not the same as having proven, at-scale production, which India does not yet have.
The limits and the realistic view
China Plus One is a genuine tailwind for India, but it is not a guarantee and it is easy to overstate. Diversification is slow, especially in semiconductors, and it does not mean production simply moves from China to India. China retains deep manufacturing strength, and the additional capacity created under China Plus One is spread across several countries competing for it. For India, converting interest into durable capacity depends on execution: finishing fabs, reaching reliable yields, deepening the supplier ecosystem, and training enough skilled workers. At the frontier, Taiwan still leads and is not being displaced by this trend. A realistic view is that China Plus One improves India's odds of building a meaningful mature-node and packaging presence over the coming years, with Dholera as a first anchor. It does not, by itself, make India a semiconductor powerhouse, and no chip has yet been produced at Dholera. Treating the strategy as a helpful but gradual force, rather than a decisive shift, keeps expectations grounded and matches how the industry actually evolves, one facility and one qualified customer at a time.