American Tech Needs A Trusted Second Home — India Can Earn It

In complex technology procurement, I have learnt a lesson textbook economics rarely captures: the largest buyer is not always the most powerful player. When a company depends on a single specialised supplier for a critical component, its scale becomes a liability rather than leverage. The more it buys, the more it stands to lose if that supplier falters. I call this the Monopsony Paradox.

Countries face the same risk. For over three decades, US technology firms concentrated hardware production in East Asian manufacturing hubs, particularly China. The decision delivered unmatched speed, scale and cost efficiency. But geopolitical shocks, trade disputes, export controls, pandemics and natural disasters have exposed the vulnerability of this concentration.

Building more factories in America is essential, but semiconductor plants take years to establish and require enormous investment. The US also needs a second manufacturing geography capable of handling substantial volumes and growing alongside technological advances. India is well positioned to fill that role.

What a real second source involves

Geographical diversification is not simply relocation. It means qualifying an alternative supplier capable of delivering meaningful volumes while existing production continues. Engineering teams, certified components, signed contracts and actual shipments demonstrate credibility far more effectively than contingency plans.

I witnessed this while helping a leading consumer technology company expand manufacturing from China into India. My team brought established global manufacturers to India to produce transformers, chargers and surface-mount technology (SMT) components, enabling the company's first India-made adapters. The experience reinforced a fundamental lesson: diversification succeeds when engineering capability, supplier economics and commercial commitments align. My procurement philosophy rests on three tests: competitive cost, reliable delivery and supplier sustainability. Together, these form my Triple-Constraint Negotiation Framework (TCNF). A supplier that fails on even one dimension may prove unreliable over time.

Why India?

India's labour costs are considerably lower than those in Japan, South Korea, Taiwan and China's industrial provinces. More importantly, its large pool of engineering graduates and established semiconductor design centres offer a pathway from basic assembly to increasingly sophisticated manufacturing. Supplychain security strengthens the case. Japan, South Korea and Taiwan remain important US partners, but their proximity to China and shared exposure to regional tensions, shipping disruptions and natural disasters create concentration risks. Japan's 2011 earthquake demonstrated how quickly semiconductor supplies can be disrupted.

Geographically distinct, India offers diversification alongside democratic institutions, an independent judiciary and a common-law tradition familiar to American businesses. Supplier sustainability is equally important. India's large domestic market can support factories when export orders weaken. Vietnam has become an important electronics manufacturing hub, but its smaller population and talent pool may constrain expansion into more complex activities. India has greater scope to progress into components, packaging, design and eventually fabrication.

Progress is already visible. India exported approximately ₹2.6 trillion worth of mobile phones in FY 2025- 26. Micron opened its memory assembly and testing plant in Sanand, Gujarat, in February 2026. A leading US processor manufacturer has partnered with an Indian company to explore chip manufacturing and packaging, while construction of India's first large commercial fabrication plant is under way at Dholera. The US-India TRUST initiative, launched in early 2025, also emphasises trusted, resilient supply chains, including semiconductors.

Why it matters for India

India's opportunity is not to become a cheaper substitute for American manufacturing but a trusted partner. Price-driven sourcing can change overnight. A trusted supplier, however, becomes integrated into product development, gains earlier access to technology and grows with successive product generations. For India, the benefits include skilled employment, stronger engineering capabilities, higher-value domestic suppliers and expanding exports. Meeting demanding international standards can also improve quality across the wider technology industry. Having served as an Indian Army officer leading Gorkha soldiers for over a decade, across regions from the Northeast to the western frontiers and central hinterland, I have witnessed both India's capabilities and the infrastructure it still needs. Five priorities stand out.

First, deepen the supplier ecosystem. Semiconductor and electronics plants depend on smaller manufacturers supplying substrates, specialty chemicals, industrial gases and precision components. Many remain imported from East Asia. A second source dependent on the first for essential inputs offers limited resilience. Second, ensure policy predictability. Semiconductor investments span decades. Stable duties, efficient customs clearance and consistent incentives matter as much as the incentives themselves.

Third, build infrastructure ahead of demand. Manufacturing requires reliable electricity, ultra-pure water, skilled technicians and efficient connections to ports and airports.

Fourth, protect intellectual property. Companies will bring advanced processes only where contracts arem enforceable and proprietary technology is secure. Fifth, avoid competing on price alone. Excessive price pressure can undermine quality and workforce investment, creating a squeeze-and-starve cycle. Incentives must nurture commercially sustainable businesses capable of surviving without subsidies. Broader conditions matter too. India needs sustained economic growth, affordable capital and stable US-India relations, alongside healthy global demand for electronics and AI hardware.

What America gains

For America, the benefits extend beyond lower costs. A credible alternative improves existing supplier pricing, service and investment decisions, strengthening buyers' negotiating power. Diversification also reduces disruption risks and gives American companies access to one of the world's fastest-growing consumer markets. The objective is neither to abandon Asia nor diminish American manufacturing. It is to ensure that the world's largest technology buyer is never trapped by dependence on a single region, particularly one whose strategic interests may diverge from its own.

India can become America's second manufacturing pillar: a partner offering scale, engineering talent and strategic resilience. Achieving that would be a major opportunity for India and a lasting strategic advantage for the United States.

The author is a Silicon Valley-based executive in semiconductor technology sourcing and global supply chain strategy, and a former Lieutenant Colonel in the Indian Army. He formalised the Monopsony Paradox in silicon procurement and the Triple Constraint Negotiation Framework (TCNF) in a peer-reviewed study. Views are personal.

Published on: Friday, October 30, 2026, 10:28 PM IST