China Plus One: Why Manufacturers Are Choosing Thailand in 2026

Key takeaways

That is why a China Plus One Thailand strategy deserves a practical assessment in 2026. The country offers an established manufacturing base alongside investment incentives, but the decision still needs to work at factory level.

The latest full-year BOI figures provide useful context. Electronics and electrical appliances accounted for 470 investment applications in 2025 while automotive and parts attracted USD 2.70 billion across 288 projects. These figures indicate investor interest entering 2026, rather than proving that every project is operational.

For business owners, the question is straightforward: would a Thai operation make production more reliable, commercially useful and financially sustainable?

What China Plus One means

China Plus One is a diversification strategy. A manufacturer keeps part of its production or sourcing in China while developing another base outside the country.

The additional operation might manufacture a particular product line, supply regional customers or provide backup capacity. It does not have to copy the original factory in full.

For example, a business could retain specialist components and tooling in China while establishing manufacturing and testing in Thailand. Over time, it could qualify local suppliers where quality, cost and availability make sense.

The aim is to reduce dependence on a single production location. However, a second factory does not automatically create an independent supply chain. If both plants rely on the same critical supplier, that dependency remains.

Start by mapping the actual risk you want to reduce: interrupted production, customer concentration, delivery delays or dependence on particular inputs. Then design the new operation around that problem.

Thailand vs Vietnam vs Indonesia: which fits your factory?

There is no universal winner. Compare specific industrial locations and production requirements before comparing national headlines.

The table below is a screening framework based on official investment and industry information. The decision questions are practical analysis, not a ranking of national performance.

Decision factor

Thailand

Vietnam

Indonesia

Manufacturing activities worth assessing

Automotive components, electronics, electrical appliances and food processing

Electronic equipment, semiconductor-related projects and supporting industries

Automotive manufacturing and mineral processing linked to industrial supply chains

Potential reason to shortlist

Your product can connect with established manufacturers and parts suppliers

Your production fits electronics clusters or customers already operating locally

Your business fits automotive demand or resource-processing opportunities

Supplier question

Can local vendors meet your technical specifications and delivery requirements?

Which inputs can be sourced locally and which must remain imported?

Are suitable suppliers located near the proposed plant?

Logistics question

How will goods move between the factory, suppliers and export port?

Which industrial location best connects your customers, inputs and shipping routes?

Does the plan require additional sea transport between production and customers?

Investment test

Does the project work with the BOI package it actually qualifies for?

Do available incentives match the exact activity and location?

Does the proposed activity fit applicable licensing and investment requirements?

Sources: Thailand BOI sector results, Vietnam investment promotion information, Indonesia Ministry of Industry automotive overview and BKPM nickel downstreaming study.

Request comparable quotations for buildings, utilities, staffing, freight and equipment installation. Include trial production, rejected output, training and inventory in the budget.

A lower wage bill can be outweighed by slower production or expensive imported inputs. Equally, a strong industrial cluster has limited value if its suppliers cannot produce your specific parts.

BOI incentives for manufacturers

Thailand’s Board of Investment promotes eligible activities through packages tied to the approved project.

Under the BOI’s published basic incentive framework, corporate income tax exemptions vary by activity group: A1 and A2 receive eight years, A3 five years and A4 three years. Certain A1+ activities receive 10–13 years. Group B does not receive a basic corporate income tax exemption. Caps and activity-specific conditions also apply. Eligible projects may receive machinery import-duty relief and relief for qualifying raw materials used in production for export.

These are framework benefits, not a promise to every manufacturer. Check the activity classification and any later announcements when preparing an application.

Land is a separate consideration. BOI-promoted entities can seek permission to own land for promoted activities, subject to approval and an appropriate land-use plan. Promotion does not provide unrestricted permission to buy any property.

Before applying, prepare a clear description of the product, production process, machinery, investment budget and staffing needs. Make sure the proposed factory matches the business described in the application.

Model the project with and without expected incentives. A tax holiday has limited immediate value while a factory is still making losses. Equipment costs, customer demand and working capital may matter more during the startup period.

For help assessing the application route, explore Settlr’s BOI support.

Supply chain and logistics position

Thailand manufacturing investment is easier to understand when viewed through supplier relationships.

In July 2026, the BOI reported more than USD 4.1 billion in investment pledges across the electric vehicle supply chain. The pipeline covered vehicles, batteries, components and charging infrastructure. The BOI also described supplier-matching activities connecting Thai parts manufacturers with international automakers.

For a potential investor, this suggests opportunities to investigate local sourcing and customer relationships. It does not guarantee purchase orders or supplier availability.

Logistics infrastructure also matters. Laem Chabang provides container and vehicle shipping facilities, while its Phase 3 development is intended to expand capacity and improve transport connections. Treat planned improvements as future benefits when budgeting for a factory opening now.

During site visits, ask practical questions:

Export origin needs its own review. Shipping a product from Thailand does not automatically make it Thai-origin. For US country-of-origin marking, further processing in another country generally needs to create a substantial transformation to change origin.

Ask a trade specialist to assess the exact product, manufacturing process and destination-market rules before including tariff savings in the business case.

Case pattern: adding Thai production in stages

Consider an illustrative manufacturer of industrial electronic assemblies. This is a planning example, not a reported Settlr client case.

The business has a functioning Chinese factory but wants another location to serve regional customers and reduce reliance on that facility.

It begins by selecting a product line with confirmed demand. The team identifies which processes can move and which inputs must initially remain sourced from existing suppliers.

Next, it compares Thai sites using the same production assumptions. It checks utility requirements, building suitability, recruitment options and proximity to customers. BOI eligibility is assessed alongside the financial model.

Before commercial production, the business establishes its operating structure and confirms the registrations, permits and approvals required for the actual activities. Customer approval of the new production site is built into the schedule.

Trial batches then test quality, output and delivery performance. Only after those results are acceptable does the company commit more orders and begin replacing imported inputs with qualified local alternatives.

This staged approach gives management evidence before each larger commitment. If you plan to expand business to Thailand, compare your expansion routes before choosing a structure or signing long-term commitments.

FAQs

Is Thailand suitable for every China Plus One strategy?

No. Thailand should be assessed against your product, customers and supplier needs. An established industrial base can help, but the proposed site still needs to deliver acceptable cost, quality and reliability.

Does every manufacturer qualify for BOI tax holidays?

No. Eligibility and benefits depend on the promoted activity and project conditions. Some promoted activities receive non-tax incentives without a basic corporate income tax holiday.

Will moving production to Thailand remove tariffs?

Do not assume it will. Origin depends on the applicable rules and manufacturing facts. Obtain a product-specific assessment before promising customers a different origin or calculating tariff savings.

What should manufacturers do first?

Prepare a project brief covering products, processes, customers, imported inputs, equipment and funding. Use it to compare locations, identify approvals and build a realistic operating budget.

How can Settlr support market entry?

Settlr helps businesses coordinate company setup, BOI applications, accounting, payroll and immigration support. Bring your manufacturing plan so the corporate and operational requirements can be assessed together.

Planning your next manufacturing base? Book a market entry consultation with Settlr to discuss your Thailand expansion route, BOI eligibility and setup priorities.