Emerging Markets Series | Part 2

The Rewiring of Global Supply Chains

Supply chains are diversifying, creating a new phase of emerging-market opportunity

Download the full article
  • Supply chains are diversifying, not deglobalising
  • EM advantages now extend well beyond labour and commodities
  • Durable winners will build capacity, skills and domestic value
  • Greater dispersion may strengthen the case for active allocation

Global supply chains are being reconfigured as geopolitical tensions, industrial policy and economic security considerations reshape trade and investment flows. This is not deglobalisation. Production is becoming more regional, more diversified, and increasingly concentrated around strategic industries.

For emerging markets, the implications extend well beyond manufacturing. The countries best positioned to benefit are those building industrial capacity, strengthening supplier ecosystems, and moving up the value chain. For investors, these shifts are creating greater differentiation across countries, sectors, and asset classes, reinforcing the importance of active allocation.

A more regional global economy

Supply chains are evolving towards regional production systems shaped by resilience, security and strategic alignment.

Three distinct ecosystems are emerging:

  • North America, centred on deeper integration with Mexico
  • Europe, expanding capacity across Central and Eastern Europe, the Western Balkans and North Africa
  • Asia, where a China-plus-many model is driving investment across ASEAN and India
Source: PGIM, As of October 2026

The key distinction is not where production relocates, but which economies can translate these shifts into lasting gains through investment in infrastructure, skills and supplier networks.

The strongest opportunities may emerge in economies that increase domestic value-added, deepen industrial capabilities and strengthen long-term competitiveness.

Explore More >


The infrastructure behind AI

Emerging markets occupy critical positions across the physical infrastructure supporting AI adoption, including:

  • Advanced semiconductors and memory
  • Power equipment and grid infrastructure
  • Industrial automation
  • Critical minerals and materials

Taiwan and Korea remain central to advanced semiconductor production, while a broader set of emerging markets are benefiting from rising investment in energy, electrification and digital infrastructure.

 

Explore More >

Reconfiguration, not decoupling

China remains central to global supply chains, but dependencies are being redistributed.

The emerging model is one of selective de-risking, with governments and companies seeking alternatives in strategic sectors while maintaining economic ties across broader trade networks.

At the same time, industrial policy, energy security and rising defence expenditure are creating new production and investment priorities across emerging markets.

Source: PGIM, As of October 2026

 

Fragmentation is increasing dispersion across economies and sectors. Distinguishing long-term beneficiaries from short-term trade intermediaries will require a more selective investment approach.

 

Explore More >

Investment Implications


Opportunities may be found where industrial capacity, policy credibility and strategic positioning combine to support sustainable growth and capital formation. As these trends develop, active country, sector and issuer selection will become increasingly important in capturing the opportunities created by a more fragmented global economy.

Read the Full Paper

The Rewiring of Global Supply Chains explores how trade fragmentation, AI infrastructure, industrial policy and shifting geopolitical priorities are reshaping emerging-market investment opportunities.

Download the Paper

References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.

 

The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.

 

Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.

6041670