Asia-Pacific industrial transactions grow against the trend: Global manufacturing investment focus is shifting to emerging markets.

The Only Bright Spot in Global Manufacturing Investment

PwC's latest mid-year M&A outlook indicates that in 2026, industrial and services transaction volumes in the Asia-Pacific region are expected to grow by 2% year-on-year, while the global figure will decline by 7% over the same period. This contrast highlights a profound reshaping of the global manufacturing investment landscape—emerging markets, rather than developed economies, are becoming the focus of capital pursuit.

Among industrial manufacturing sub-sectors, global transaction volume is expected to grow by 5%, second only to aerospace and defense. The growth engine in the Asia-Pacific region comes mainly from India and Southeast Asia, economies that are benefiting from the accelerated implementation of multinational companies' "China+1" supply chain strategies.

Supply Chain Relocation and Localization: Dual Drivers

PwC's analysis clearly states that India and Southeast Asia will continue to attract manufacturing investment as companies diversify their production and supply chains away from China. Japan and South Korea, leveraging their strengths in automation, battery technology, and electronics, are also expected to see active dealmaking.

De-risking and tariff avoidance are the core drivers of this shift. By localizing production and restructuring supply chains, companies reduce their reliance on a single market and protect access to key markets. PwC specifically notes that divestitures of non-core businesses and manufacturing operations benefiting from localization may offer attractive deal opportunities in India and Southeast Asia.

Automation and AI Infrastructure: An Upgrade in Deal Targets

Manufacturing transactions are shifting toward higher-value segments. Deal targets are concentrated in assets that support AI infrastructure, grid resilience, and automation, including robotics, industrial software, sensors, and interconnected systems. These technologies not only boost productivity but also reduce reliance on labor—a trend that is particularly critical against the backdrop of rising labor costs and aging populations.

PwC expects that by 2030, the median share of industrial manufacturers with highly automated processes will rise from 18% to 50%. This suggests that automation investment will become a core theme in global manufacturing M&A in the coming years.

Regional Divergence and Risks

However, cross-border transactions still face significant headwinds. Geopolitical uncertainty, tariff policy changes, and adjustments in national industrial policies complicate the deal environment. Opportunities within APAC are uneven: India and Southeast Asia benefit from demographic dividends and young labor forces, while Japan and South Korea must cope with shrinking labor pools but maintain competitiveness through technology upgrades.

PwC emphasizes that its 2026 projections are based on announced transaction data from the first five months of the year, adjusted for reporting lags, and are intended for year-on-year reference only, not as strict forecasts. Yet even so, the trend is clear: the center of gravity in global manufacturing investment is shifting from developed countries to emerging markets, with the Asia-Pacific region becoming the core stage for this structural change.

Implications for Global CapitalFor international investors, this trend means reassessing regional allocation. India and Southeast Asia offer not only cost advantages but also an expanding domestic demand market. Automation and digital trading will create new growth points, while localized supply chain assets may provide defensive value.

However, risks cannot be ignored. Sudden policy changes, infrastructure bottlenecks, and skill shortages may affect investment returns. Therefore, in-depth analysis of specific countries' policy stability, labor quality, and industrial ecosystem will be key to the success or failure of transactions.