China has served as the world’s electronics manufacturing powerhouse for decades. Its vast infrastructure, mature supply chains, and competitive labour costs made it the obvious choice for OEMs seeking scalability and speed. But recent economic shifts and rising political tensions are forcing businesses to rethink their dependency on China for their manufacturing needs.
With increasing tariffs and growing concerns around supply chain resilience, outsourcing to China is no longer the default low-risk option it once was. So, what alternatives can offer greater long-term stability and strategic value for OEMs?
The risks of tariffs and trade barriers
One of the most tangible challenges companies face when outsourcing to China is the cost impact of ongoing trade disputes between the United States and China. Since returning to office, Trump has imposed a baseline import tax of 10% on imports and an up to 145% duty on goods from China. China promptly reacted to this move with a 125% levy on US goods, and the US, in turn, implemented a 90-day tariff pause to “allow room to negotiate lower trade barriers”.
After a period of negotiations in Switzerland, the two sides announced a bilateral reduction in tariffs for 90 days, reducing tariffs on Chinese imports to 55% until 12 August 2025. Although this "truce" gives businesses an opportunity to stock up on Chinese goods in the short term, the future remains unclear.
While the two global superpowers battle it out in a tug-of-war over the trade war, businesses face unpredictable cost structures that can impact everything from procurement forecasting to end-product pricing. And simply spreading tariff-related cost increases across customers might seem like a quick fix, but it poses greater long-term risks to your business reputation and competitive advantage.
Questions OEMs should be asking
Amidst the challenges these shifts pose to the global electronics manufacturing landscape, OEMs must assess their current strategies through a critical lens. While perhaps not a matter of abandoning China altogether (at least not yet), it's become clear that relying on a China-based strategy alone exposes companies to volatility that can well be avoided.
Ask yourself:
- How exposed is our current operation to tariff fluctuations and regulatory uncertainty?
- Can our current outsourcing partners guarantee business continuity, scalability, and adaptability—both now and in the future?
- Are we confident in the credentials and compliance of our supply chain?
- Could alternative geographies help us achieve better stability, cost efficiency, or technical capability?
In this climate, exploring stable alternatives outside China becomes an attractive option for mitigating the inherent uncertainties arising from the escalating trade war.
Strategic alternatives to China: What are the options?
Fortunately, OEMs today have a variety of high-quality options beyond China. These regions combine manufacturing excellence with cost-effectiveness, transparency, and geopolitical stability. Here are some standout outsourcing alternatives to China worth considering:
Malaysia: The agile ASEAN leader
With proximity to major APAC markets, political stability, and English proficiency, Malaysia has rapidly emerged as a key player in high-tech electronics manufacturing, especially for medical devices. The country’s electrical and electronics industry is a cornerstone of the Malaysian economy, accounting for 40% of the nation's total exports in 2023.
Both Penang, on the northwest coast, and Johor Bahru, situated on the southern tip of the Malay Peninsula, offer considerable advantages:
Penang: Southeast Asia’s “Silicon Island”
Penang, often called “the Silicon Valley of the East,” has a strong ecosystem of skilled engineers, globally recognised manufacturing hubs, and mature supply chain networks. In 2023, it attracted $12.8 billion in investments, bolstering its position as a hub for semiconductor manufacturing and AI chip testing.
Having cultivated a robust electronics cluster over four decades, Penang is not just a hub for high-volume assembly, but also a centre for advanced design, engineering, and precision manufacturing—ideal for supporting complex product builds and R&D activities.
Johor Bahru: The high-value manufacturing gateway to Singapore
Johor Bahru, just across the causeway from modern city-state Singapore, is a prime location for cost-effective, high-value electronics manufacturing. Its proximity to Singapore’s global logistics and finance centres gives OEMs the best of both worlds: competitive operating costs and access to world-class infrastructure.
The region supports high-capacity PCB assembly, box-build, and sub-assembly operations across industrial, medical, and consumer electronics sectors. It’s also a good option for logistics-intensive OEMs that require fast transit times and international reach.
Thailand: A mature manufacturing ecosystem in the heart of ASEAN
Thailand has long been a manufacturing leader in Southeast Asia, but its recent investments in the Eastern Economic Corridor have further reinforced its status as a regional electronics hub. Known for high-quality production in automotive electronics, industrial automation, and digital appliances, its well-developed infrastructure, supportive government, and established EMS ecosystem make it particularly attractive for OEMs seeking operational stability.
With strong engineering talent, advanced logistics, and trade-friendly policies, Thailand offers a highly strategic location for OEMs looking to diversify from China without sacrificing production quality or delivery efficiency.
Vietnam: Southeast Asia’s dynamic electronics exporter
Vietnam has quickly emerged as one of the most vibrant alternatives to China, especially for consumer electronics, mobile devices, and high-volume PCB assembly. Its strong trade ties with the US and the EU, growing middle class, and government-backed initiatives have led to the rise of industrial parks and export zones, fueling development in supply chain, logistics, and component manufacturing.
As of 2023, Vietnam’s total export value of electrical machinery and electronics was $186 billion, making it the 4th largest exporter for this category globally. While still developing in regulatory sophistication, Vietnam’s cost structure and dynamic workforce give OEMs a nimble, scalable manufacturing location that continues to grow in strategic relevance.
India: The rising electronics giant with global ambitions
Backed by strong government programmes like the Production Linked Incentive scheme and a vast, skilled workforce, India is quickly becoming a global hub for electronics manufacturing. Its large domestic market, combined with English-speaking talent and improving infrastructure, makes it a formidable alternative for OEMs seeking both scale and cost efficiency.
With cities like Bengaluru, Chennai, and Noida emerging as hotspots for component manufacturing, PCB assembly, and full product integration, the country’s electronics manufacturing sector is accelerating, creating an increasingly mature ecosystem with considerably less geopolitical risk compared to China.
Mexico: The nearshoring powerhouse for North American OEMs
For OEMs targeting the US and Canada, Mexico presents a compelling case for nearshoring. Its proximity to the US border and lower labour costs have made it a go-to destination for electronics assembly, automotive electronics, and industrial controls manufacturing. With over $100 billion in electronics exports in 2023, Mexico is now second only to China in electronics exports to the U.S.
Mexico offers shorter supply chains, fewer time zone challenges, and significant transportation savings, making it particularly attractive for OEMs prioritising market speed and real-time supply chain responsiveness. Its logistical convenience, regulatory alignment, and cost competitiveness make it an ideal outsourcing alternative to China for North American and global brands alike.
Working with a global outsourcing partner: ESCATEC’s footprint
With a diversified, well-established electronics outsourcing partner, OEMs can achieve geographical flexibility, compliance readiness, technical expertise, and financial stability. With global operations across Malaysia, Europe, and the United Kingdom, ESCATEC allows customers to flex production based on market demand, reduce risk through distributed supply chains, and maintain full traceability and process control.
Our long-standing presence in Malaysia gives customers access to scalable infrastructure, prototyping agility, and a fully certified, customer-centric process, without the geopolitical baggage. Our Penang facility offers fast-turn prototyping, high-mix low-volume builds, and seamless transitions to volume manufacturing—all within a well-regulated, English-speaking business environment.
Similarly, our operations in Johor Bahru are tailored for scalability, making it ideal for companies that need to expand production volumes without sacrificing quality or compliance. With robust supply chains, lower labour costs, and a government committed to industrial growth, these Malaysian hubs offer a strategic, low-risk outsourcing alternative to China, readily accessible through ESCATEC.
Is it time to reevaluate your outsourcing strategy?
Outsourcing to China may still have a place in the global supply chain, but it’s no longer the obvious choice. As risks rise and market dynamics evolve, OEMs must think more globally and more strategically. The good news is that there are options that are both viable and accessible.
It’s important to bear in mind that outsourcing your electronics manufacturing is more about building a long-term strategic relationship that can withstand geopolitical risks than it is about just finding a factory. This makes partnering with a trusted outsourcing partner invaluable.
With the right EMS partner, OEMs can access world-class manufacturing capabilities across stable, business-friendly geographies without compromising quality, speed, or compliance. As the global political climate becomes increasingly uncertain, outsourcing partnerships like these can provide some much-needed security.
Author's note: All information correct at time of publishing
