Building an Electronics and Engineering Hub Amid China’s Rising Costs
By Thisara Kodagoda
For decades, China has dominated global electronics assembly and light engineering, combining vast industrial capacity with competitive costs. Yet rising wages, stricter regulations, and escalating geopolitical tensions with the United States and Europe are steadily reshaping the global manufacturing map. In this shifting landscape, countries like Sri Lanka have a timely opportunity to position themselves as emerging hubs for electronics assembly and precision light engineering.
China’s rapid economic ascent has driven average manufacturing wages steadily upward, with significant increases over the past decade. As the country focuses on higher-value industries and technological leadership, traditional cost advantages in labor-intensive manufacturing—particularly in electronics assembly and light engineering, are fading.
At the same time, global brands are under pressure to keep costs competitive while ensuring resilient supply chains. This has led many multinational companies to explore new manufacturing destinations that combine lower costs with favorable trade access and logistical advantages.
Geopolitics Driving Diversification
Beyond cost, geopolitical dynamics are becoming a decisive factor. Trade tensions between China and major Western economies have introduced tariffs, export controls, and growing regulatory uncertainty. Companies that once viewed China as an irreplaceable base for electronics assembly are now actively pursuing diversification under the “China Plus One” strategy.
This global pivot is creating openings for emerging economies ready to meet the demand for alternative production sites, particularly in specialized sectors like consumer electronics, electronic components, and precision light engineering.
Sri Lanka’s Strategic Advantages
Sri Lanka, strategically located along major Indian Ocean shipping routes, offers compelling advantages for electronics assembly and light engineering investment.
Firstly, its proximity to key markets in South Asia, the Middle East, and Europe supports efficient distribution, especially from the well-connected Port of Colombo. This reduces lead times, an essential factor in the fast-moving electronics sector.
Secondly, Sri Lanka has a young, adaptable workforce whose wages remain significantly lower than in China. With targeted training in electronics assembly techniques, circuit board testing, and precision engineering, Sri Lanka can quickly build a talent pipeline to serve global manufacturers.
Additionally, Sri Lanka enjoys preferential trade access to the European Union under the GSP+ arrangement, providing duty-free entry for many manufactured goods. This is a major advantage for electronics and light engineering firms targeting European consumers.
Investing in Infrastructure and Skills
To fully seize this opportunity, Sri Lanka must focus on strengthening its manufacturing ecosystem.
Investment in industrial zones equipped with reliable electricity, modern logistics, and digital infrastructure is vital. Establishing technology parks dedicated to electronics and engineering could attract both foreign investors and local entrepreneurs.
Equally critical is investing in human capital. Partnerships with international firms and technical institutes can develop specialized training programs in electronics assembly, robotics, and quality control—raising workforce productivity and competitiveness.
Creating a Sustainable Competitive Edge
Sri Lanka should view this moment as a chance to move beyond traditional low-cost assembly. Embracing Industry 4.0 technologies, such as automation, IoT integration, and data-driven quality monitoring—can position the country as a reliable and forward-looking partner in global supply chains.
Moreover, aligning with global sustainability standards, through renewable energy use, waste reduction, and eco-friendly packaging, can help Sri Lankan manufacturers meet growing demand from Western buyers for environmentally responsible production.
Looking Ahead
China’s rising costs and geopolitical tensions are not merely challenges to global manufacturing, they are catalysts for a new, more diversified industrial order. For Sri Lanka, this moment offers an opening to build a reputation as a trusted hub for electronics assembly and precision light engineering.
With strategic policy support, infrastructure development, and a focus on skills and technology, Sri Lanka can turn shifting global dynamics into a powerful engine for industrial growth, creating jobs, boosting exports, and carving out a sustainable niche in the high-value manufacturing landscape.
