Why emerging markets are the next frontier for ER&D talent | Blog

Innovation has become both an opportunity and an obligation for global enterprises. With technology cycles shortening and competitive pressures intensifying, the ability to engineer new products, digital platforms, and customer experiences at scale is now central to business success. Engineering, research, and development (ER&D) has emerged as the engine driving this transformation. 

However, sustaining that momentum is becoming increasingly difficult in traditional innovation hubs. Mature markets in North America and Western Europe are facing persistent cost inflation, tightening labor markets, and shrinking availability of specialized technical talent. At the same time, enterprises are under investor pressure to maintain margin discipline while continuing to fund next-generation innovation. Balancing innovation and efficiency has become a strategic imperative.

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To overcome these constraints, global enterprises are expanding their ER&D footprints into new geographies. Emerging markets such as India, Vietnam, Mexico, and Poland are no longer seen merely as cost-efficient delivery locations. They now offer access to skilled engineering talent, robust academic ecosystems, and growing innovation clusters that can support high-value R&D activities. 

This shift is being institutionalized through Global Capability Centers (GCCs), the in-house global delivery arms of multinational corporations. Once focused primarily on back-office or IT support, these centers are rapidly evolving into full-fledged engineering and product innovation hubs, delivering design, prototyping, and advanced research at scale. 

The shifting geography of ER&D 

Everest Group’s latest research shows that the top 200 ER&D enterprises invested US$815.1 billion in 2024, accounting for more than half of total global spend. Asia-Pacific has emerged as the fastest-growing region, with 44% of top automotive R&D spenders based in China, Japan, and South Korea, and semiconductor ER&D expanding by over 12% year-on-year as chip design and fabrication investments accelerate. 

As enterprises recalibrate their engineering portfolios, many are turning to GCCs in emerging markets as long-term innovation anchors. Several peers have already made decisive moves to embed ER&D ownership within their captive models. 

For example, Infineon Technologies has established a GCC in GIFT City, India, to lead chip design and product software development. ZEISS launched a Bangalore center focusing on Artificial Intelligence (AI), cybersecurity , and digital transformation, while OpenText now runs nearly 70% of its global R&D through its Indian centers, positioning them as engines of product-led growth. 

Beyond India, this pattern continues across regions. Samsung’s R&D center in Hanoi, Intel’s Guadalajara Design Center in Mexico, and SAP Labs Vietnam are part of a broader movement toward distributed innovation. These centers are no longer peripheral, they are integral to their parent companies’ global product roadmaps and future competitiveness. 

Why emerging markets matter now 

The appeal of emerging markets has evolved far beyond cost arbitrage. Enterprises are leveraging GCCs to capture three interconnected advantages that go to the heart of sustainable ER&D delivery. 

Talent availability at scale : Emerging economies have developed deep, specialized engineering ecosystems that rival mature markets in skill and sophistication. India and Eastern Europe now house thousands of engineers working on semiconductor design, automotive software, and AI-driven systems. Many peers have expanded rapidly in these regions - Honeywell and Rolls-Royce, for instance, have grown their Indian hubs to include aerospace, automation, and sustainability-linked innovation. In Latin America, Intel’s Costa Rica R&D center and Bosch’s Guadalajara innovation labs are scaling teams dedicated to embedded systems, digital design, and data analytics - signaling a decisive move from support work to core engineering.

Cost competitiveness with control : While outsourcing once delivered the cost edge, GCCs now enable enterprises to combine efficiency with control over intellectual property, governance, and integration with global business priorities. Continental and Bosch, with captive centers in Romania and Mexico, are good examples of firms managing cost pressures while retaining IP ownership and engineering depth. Similarly, Boston Scientific’s Costa Rica R&D Center of Excellence and Stellantis’ Africa Technical Center in Morocco illustrate how emerging-market hubs can deliver high-value innovation while sustaining cost advantages.

Strategic value beyond cost : The new generation of GCCs provides proximity not just to low-cost talent, but to dynamic innovation ecosystems and emerging customer markets. Micron Technology and Western Digital in Malaysia are harnessing local manufacturing clusters to advance R&D in storage and energy-efficient chip architectures. Meanwhile, Valeo’s Cairo center, employing over 2,000 engineers, has become the largest automotive software R&D hub in the region, a prime example of how location and capability integration are reshaping competitive advantage.

Industry case examples 

This distributed ER&D model is now redefining how industries innovate. Leading peers across sectors are using GCCs to diversify risk, accelerate development cycles, and build resilience into their global engineering strategies. 

Automotive: Companies like BYD and Geely are leading electric-vehicle platform innovation in Asia, while Bosch and Continental continue to expand their engineering operations across Romania and Mexico to strengthen global delivery 
Semiconductors: Firms such as AMD and Infineon are scaling design and verification functions through India-based GCCs, providing critical support for global chip development programs
Industrial products: Honeywell and Rolls-Royce are leveraging their GCCs to integrate digital manufacturing, automation, and product lifecycle innovation, linking design centers in India with supply-chain and technology hubs in Southeast Asia

These examples underscore a clear trend: leading enterprises are no longer offshoring engineering tasks. Instead, they are redistributing innovation capacity across an interconnected GCC network that blends global governance with local agility. 

Looking ahead 

As ER&D continues to globalize, GCCs are emerging as the essential bridge between enterprise engineering ambitions and local innovation potential. The best-performing organizations are those that move beyond viewing GCCs as cost levers and instead use them as strategic instruments to scale talent, accelerate R&D, and strengthen resilience. 

For GCC and GBS leaders, the next frontier of differentiation lies in how effectively they design and govern ER&D operations across these markets. Those that combine global standards with local empowerment and ecosystem partnerships will lead the next wave of engineering-driven value creation.   

Read more: Everest Group – Leading the Pack: Trends for the Top 200 Engineering Research and Development (ER&D) Enterprises 2025 

If you found this blog interesting, check out The Rise Of Holistic Global Capability Center (GCC) Set-up Solutions: Partnerships, Playbooks, And Pitfalls | Blog – Everest Group, which delves deeper into the ever-evolving landscape of GCCs.

If you have any questions or want to discuss ER&D or GCCs in more depth, please contact Shaurya Thakur ([email protected]).