India and China are dominating the API industry globally, driven by several factors, including low labour costs, a highly skilled workforce, strong infrastructure, numerous USFDA/EMA-approved plants, and government-friendly policies. For instance, India’s investment commitment (i.e., ₹3,938.5 crore) has exceeded this figure and reached ₹4,570 crore in 2025, specifically in this sector. These numbers not only show strong growth but also reflect the commitment of companies to the API industry and further advancement through continuous research and development.
China controls 70–80% of the global Key Starting Material (KSM) supply and 60–70% of the global intermediate supply, making it a global leader in this sector. Government initiatives such as tax rebates for exporters and subsidies for chemical park zones are among the key factors that act as catalysts for China’s growth in the API industry.
India and China hold a competitive advantage that helps them maintain leading positions in this sector. China commands raw material supply, while India holds a significant position in processing and manufacturing the final products. However, heavy global reliance on these two countries is increasingly being viewed as a supply risk. Recent tariff uncertainty, periodic quality and compliance concerns, and broader geopolitical or logistics disruptions have pushed other regions to diversify sourcing. As a result, several countries are now actively investing in domestic and regional API manufacturing to reduce dependence on India and China and to improve supply security.
Several Macroeconomic Factors Affect the Production of APIs:
- Raw Material Imports – Most countries depend on China for the import of KSMs and API intermediates, which constitute around 40–60% of the cost and therefore directly impact manufacturing costs. This dependence becomes critical when tariffs rise or trade routes face disruption, making API costs volatile and supply less predictable.
- Labour Cost – Labour cost is one of the critical factors affecting the decision of whether to manufacture locally or import APIs.
- Supply Chain Disruption – Due to overdependence on India and China, even a small disruption in the supply chain in this region can significantly affect the market. Therefore, many governments are supporting near-shoring and on-shoring strategies to develop alternative API hubs.
- Regulatory Standards – One of the main points that must be strictly considered in this sector is meeting regulatory requirements, including USFDA and EMA approvals. Compliance is essential for business expansion, whether through setting up manufacturing plants or partnering with companies in other countries.
Outlook of Other Countries in the API Sector
- In 2025, US President Donald Trump urged the pharmaceutical industry to manufacture medicines domestically instead of importing active ingredients and finished products.
- In September 2025, Eli Lilly and Company announced plans to build a new $6.5 billion facility to manufacture active pharmaceutical ingredients in Texas. The facility will focus on manufacturing the company’s pipeline of small-molecule medicines across therapeutic areas, including cardiometabolic health, oncology, immunology, and neuroscience.
- In September 2025, AbbVie announced the construction of a new active pharmaceutical ingredient (API) manufacturing plant in North Chicago, Illinois.
- In 2025, the European Commission stated in its CMA Strategic Report that there is an “overreliance on a limited number of geographical locations” (primarily China and India) for APIs. As a result, Europe is now focusing on strategic investments in the API sector to reduce its reliance on other countries.
- In September 2025, pharma&’s Pegasys received EMA approval for API manufacturing through Loba Biotech GmbH in Austria.
- In September 2025, AGC Pharma Chemicals inaugurated its manufacturing plant in Malgrat de Mar, Barcelona, to produce highly potent APIs (HPAIs) for medicines in oncology and other high-potency therapeutic areas. The company made a significant investment of more than 100 million euros.
- In July 2025, Axplora announced plans to invest approximately $38 million (€35 million) to expand its Farmabios API manufacturing site in Gropello Cairoli, Italy. This plant will strengthen its manufacturing capacity in high-potency APIs (HPAPIs).
