China’s vertically integrated model provides greater control over supply chains, cost efficiency, and innovation synergies. This model has helped China dominate industries such as electronics, automotive, and industrial manufacturing, where deep coordination between suppliers and producers is crucial. A prime example is China’s semiconductor industry, where state investment has strengthened domestic chipmakers, reducing reliance on foreign technology. However, this model also faces challenges, particularly in overcoming technological dependencies and geopolitical constraints.
India, by contrast, follows a horizontal specialization model, where different firms focus on specific segments of the value chain. This approach requires less capital investment, encourages global partnerships, and aligns well with industries where R&D and production can be geographically dispersed. In the automotive sector, for instance, Indian firms such as Tata Technologies and Infosys provide digital engineering and automation solutions for global car manufacturers, bridging software and manufacturing without full-scale production facilities.
India’s pharmaceutical industry exemplifies the benefits of horizontal integration, particularly in the generic medicine sector. India is the world’s leading supplier of generic drugs, accounting for over 40% of the U.S. market. Unlike China’s vertically integrated pharmaceutical sector, India has succeeded by leveraging a combination of process patents, cost-efficient production, and strategic global partnerships.
Sun Pharmaceutical Industries is a case in point. Initially focused on generics, the company later expanded into specialty and branded drugs through acquisitions, demonstrating how horizontal integration enables value-chain upgrades. Similarly, firms like Biocon and Dr. Reddy’s have leveraged their strengths in generics to enter the contract development and manufacturing organization (CDMO) space, working with multinational pharmaceutical companies on advanced drug development.
While India initially built its pharmaceutical success on cost efficiency, it is now moving up the value chain into biologics, specialty medicines, and high-end research. This shift illustrates how horizontal models can evolve to capture higher-value segments, reinforcing India’s growing influence in the global pharmaceutical landscape.
Despite its dominance in pharmaceuticals, India lags behind in medical device manufacturing, a sector historically controlled by global giants such as GE, Siemens, and Toshiba. However, the industry is undergoing a transformation, shifting from hardware-driven products to service-based, software-integrated solutions.
For India to establish itself as a global player in medical devices, it must strengthen its local supply chains, encourage deeper collaboration between universities and industry, and leverage government incentives to attract investment in domestic production. The transition to a more digital and services-driven healthcare model presents a strategic opportunity for India to integrate its software strengths with traditional manufacturing capabilities.
Beyond pharmaceuticals and medical devices, India’s software industry is reshaping global manufacturing by shifting value from physical production to data-driven services. In the automotive sector, the growing emphasis on connected vehicles and autonomous systems has made India a key hub for automotive software development. Meanwhile, smart grid solutions and predictive analytics are modernizing energy networks, while AI-driven predictive maintenance is improving factory efficiency worldwide.
Bosch India’s operations exemplify the evolving nature of global manufacturing. The company has strategically leveraged India’s AI expertise to optimize its production networks worldwide. This integration of advanced software capabilities into manufacturing processes underscores the increasing centrality of digital technologies in modern industrial operations, potentially offering Bosch a competitive edge in efficiency and innovation.
While India has significant strengths in software and digital transformation, its manufacturing sector faces structural challenges. One key issue is workforce readiness. India’s workforce is comparable in size to China’s, but literacy rates, advanced manufacturing skills, and female labor force participation remain significantly lower. In manufacturing-driven economies, these factors influence productivity and industrial scalability.
China has benefited from a strong, state-driven industrial policy that has supported manufacturing through large-scale infrastructure investment, subsidies for priority sectors, and strict technology transfer requirements for foreign firms. In contrast, India has taken a more market-driven approach, though recent policy reforms are addressing historical bottlenecks. Initiatives such as the Production-Linked Incentive (PLI) scheme are helping boost local manufacturing, while deregulation of labor laws and improvements in ease of doing business have made India a more attractive destination for industrial investment.
India’s emerging toy manufacturing industry presents an interesting case of policy-driven industrial growth. Recent government initiatives, including local content requirements and tariff adjustments, have reshaped the competitive dynamics of this sector. As a result, India has begun to capture a growing share of the global toy production market, a space traditionally dominated by Chinese manufacturers. This shift highlights the potential impact of aligned government policies and industry needs in developing new manufacturing capabilities.
Traditional value chain analysis is no longer sufficient for understanding global industries. As manufacturing becomes more software-driven, companies must move beyond sector-based strategies and adopt a layered approach, considering the integration of software with traditional industries, the rise of data-driven, subscription-based business models, and the increasing interdependence of manufacturing, AI, and IoT.
This shift requires firms to rethink supply chains, innovation models, and global partnerships. Companies that can successfully navigate this transformation by integrating software with traditional production and leveraging cross-industry collaboration will be best positioned to lead in the next phase of global industrial evolution.
India and China represent two distinct pathways to manufacturing success. China’s vertically integrated model has allowed it to achieve dominance in scale-driven and infrastructure-heavy industries, while India’s specialization model has enabled it to succeed in technology-driven and service-enhanced sectors.
As technology reshapes industry boundaries, firms must rethink their manufacturing strategies. The future of global manufacturing will not be defined by a single model but by the ability to integrate digital capabilities, optimize global partnerships, and embrace the layered industrial transformation that is already underway. Companies that successfully adapt to this changing landscape will emerge as leaders in the next era of global industry.
IGPI possesses extensive experience supporting companies in aligning their manufacturing strategies with either vertical or horizontal integration models, depending on their industry and market needs. By considering strategic trade-offs, we can help businesses optimize their processes to retain competitiveness.
To find out more about how IGPI Group can provide support for businesses, browse through our insight articles or get in contact with us.
Kohki Sakata, CEO of IGPI Singapore
After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation where he managed projects on global expansion and turnaround in various sectors including F&B, healthcare, retail, IT, etc. After joining IGPI, he has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that has been developed in Western countries, he has developed multiple methods to turnaround Asian companies with focus on setting clear vision and employee empowerment. Kohki has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management.
He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Shivaji Das, Managing Director of IGPI Singapore
Shivaji has over 20 years of strategy consulting experience, specializing in New Business Models, Innovation Roadmaps, and Sustainability Journeys. He has worked with private and public sector clients across 25 countries in sectors like Technology, Semiconductors, Chemicals, Healthcare, Renewable Energy, and Construction. Previously, Shivaji was a Partner and Managing Director-APAC at Frost & Sullivan. His paper on Artificial Intelligence was presented at CAINE-2000 in Hawaii, USA. He is the author of seven acclaimed travel, art and business books including The Visible Invisibles and Rebels, Traitors, Peacemakers (both Penguin Random House), as well as The Great Lockdown: lessons learned during the pandemic from organizations around the world (Wiley, USA).
He is an alumnus of IIT Delhi and IIM Calcutta.
IGPI Group is a Japan rooted premium management consulting & Investment Group headquartered in Tokyo with a footprint in Osaka, Singapore, Hanoi, Shanghai & Melbourne, as well as parts of Europe and India. The organization was established in 2007 by former members of the Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI Group has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI Group has vast experience in supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~8,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
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