China+1 and the Quiet Rise of Vietnam in Electronics Manufacturing

For two decades, the default answer to 'where do we make it?' was a single word: China. The Pearl River Delta offered an unmatched density of component suppliers, tooling shops, contract assemblers and logistics that let a hardware team iterate a design on Monday and hold a molded part on Friday. That ecosystem has not disappeared, and predictions of its demise are overstated. What has changed is the risk appetite of the companies that depend on it.

Tariff volatility, pandemic-era shipping shocks and a broad corporate mandate to diversify have turned 'China+1' from a hedging strategy into a structural shift. Vietnam has captured a disproportionate share of that shift in electronics and consumer hardware. Its advantages are concrete: a young workforce, competitive labor economics, a growing web of free-trade agreements, and geographic proximity that lets components still flow from Chinese suppliers into Vietnamese final assembly with minimal friction.

The critical nuance, often lost in the headlines, is that Vietnam is not yet a full substitute. The upstream supply base for precision components, specialty plastics and advanced PCBs remains concentrated in China. In practice, the most effective operating model is a dual footprint: keep engineering-intensive prototyping and early production close to the Chinese component ecosystem, then transfer mature, high-volume lines to Vietnam once the design is frozen and the bill of materials is stable.

This is where operational discipline separates winners from tourists. Moving a line is not a spreadsheet exercise; it is a transfer of tacit knowledge, quality tooling and supplier relationships. Companies that treat the second site as a photocopy of the first are surprised when yields dip and lead times stretch. Those that invest in dual-sourcing qualification, on-the-ground quality engineering and a deliberate ramp curve preserve the resilience they were seeking in the first place.

Our own footprint reflects this thesis. Retaining a dedicated factory in Shenzhen for engineering-heavy work while standing up a manufacturing base in Vietnam gives product teams the best of both worlds: the iteration speed of a mature ecosystem and the geographic diversification that de-risks a single-country dependency. The lesson generalizes. In a decade defined by supply-chain shocks, the objective is no longer the lowest landed cost per unit; it is the lowest cost of disruption.

Looking ahead, we expect the 'plus one' to become 'plus two' for larger programs, with regional assembly closer to end markets in Europe and North America for tariff-sensitive or time-sensitive products. The winners will be the firms that build a portfolio of manufacturing options and the organizational muscle to move production between them, rather than betting the roadmap on any single geography.