From Globalisation To Deglobalisation: How Supply Chain And Investments Are Evolving

For many years, globalisation was the underlying framework for international commerce. Products were designed, manufactured, and shipped across multiple countries, with businesses and consumers relying on seamless global supply chains to access goods at competitive prices. This interconnected system faced significant disruption from events such as pandemic lockdowns, escalating trade wars, and growing geopolitical tensions, all of which revealed vulnerabilities and led to widespread supply chain re-evaluations.

Today, globalisation is giving way to deglobalisation. Instead of relying on a single international supply chain, companies are developing regional supply networks with multiple local factories and backup suppliers.

For investors, this may signal fresh potential investment opportunities waiting to be tapped into.

Table of contents

• Drivers: Trade wars, geopolitical tensions, pandemic shocks
• Impact across key sectors
• India’s strategic opportunity
• Investor implications
• Risks & considerations

Drivers: Trade wars, geopolitical tensions, pandemic shocks

So what’s driving this transition? There are three primary factors:

• Trade wars: The tariff disputes between major economies like the US, China, and India highlighted the risks of dependence on any one country for sourcing, leading multinational firms to adopt the China+1 strategy—adding alternative production bases outside China to diversify risk.
• Geopolitics: Conflicts such as the Russia–Ukraine war and rising concerns over Taiwan have elevated political risk. Companies are increasingly factoring in geopolitical issues when making supply chain decisions, not just cost considerations.
• Pandemic shocks: The COVID-19 pandemic exposed weaknesses in global supply chains—such as the inability to source essential components when overseas factories closed—prompting companies and governments to invest more in domestic and regional production.

These factors have prompted permanent changes in how global procurement and production are managed.

Read Also: Deglobalisation Investing: Opportunities & Risks for India

Impact across key sectors

• Manufacturing: India’s manufacturing sector is expanding, particularly in electronics, pharmaceuticals, and renewables. Government programs such as the Production Linked Incentive (PLI) scheme are drawing international investment and encouraging more local manufacturing.
• Logistics: Regional supply chains require robust local logistics infrastructure—warehouses, cold storage, ports, and freight services are considered important for efficient operations as companies shorten supply lines.
• Defence: National security concerns are driving investments in domestic defence manufacturing, supporting initiatives like ‘Atmanirbhar Bharat’ for locally produced equipment and systems.
• Technology: Countries and companies are investing heavily in domestic semiconductor and solar cell production, aiming to reduce reliance on international suppliers.

These sectoral developments are creating potentially new economic ecosystems and consequently, potential investment opportunities.

India’s strategic opportunity

Many researchers think India is well-positioned to potentially benefit from deglobalisation trends. The adoption of the China+1 strategy by global firms seems to be aligned with local initiatives like ‘Make in India’ and the PLI schemes. Infrastructure investments, a robust workforce, and improving logistics networks may further enhance India’s potential as a major manufacturing hub.

Investor implications

Investors can consider opportunities in sectors and companies enabling this transition:

• Electronics, automotive components, chemicals, and pharmaceuticals are likely to potentially benefit as localisation efforts expand.
• Infrastructure and logistics firms—including warehouse developers and freight operators—might become crucial for facilitating regional supply chains.
• Defence stocks and companies specialising in technology for renewables are aligned with self-reliance initiatives.
• The focus is said to be shifting from lowest cost to highest resilience and adaptability.

In short: If globalisation rewarded the cheapest producer, deglobalisation rewards resilient enabler.

Read Also: Flexi Cap Globalization Opportunities & Challenges

Risks & considerations

While deglobalisation may enhance supply chain resilience, it may bring risks such as higher costs, fragmentation, and increased policy uncertainty. Local production often tends to raise prices, duplicates standards, and may create inefficiencies. Shifts in policy and trade incentives may affect company margins and potential investor returns in the short-term.

Investors are advised to balance expectations of resilience with awareness that potential returns may be slower, but potential chances of longer-term stability might be higher.

Conclusion

Globalisation isn’t ending, but it’s evolving. Regional supply networks may reduce the traditional cost advantages of globalisation, as they potentially create more durable and reliable systems. For India, the confluence of global trends and local policy may be an opportunity for potential growth.

Investors are advised to look beyond headline trends and focus on businesses building and enabling resilient supply chains. As global trade continues to evolve, the companies enhancing adaptability and security might be well-placed to deliver potentially sustainable long-term value.

Note: References to any industry/sector are provided for illustrative purposes only. This should not be construed as a research report or a recommendation to buy or sell any security or sector.

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