<p><strong>Executive Summary</strong></p><ul><li><p>Technology supply chains carry geopolitical risks across procurement, sourcing, location strategy, partnerships and capital allocation.</p></li><li><p>The US-China contest is essentially selective denial regime.</p></li><li><p>Full decoupling is unlikely, but restrictions at the high end of chips, AI compute, critical minerals and dual use technologies will deepen.</p></li><li><p>China’s coercive architecture has moved from episodic retaliation to an institutionalised legal and regulatory system, creating direct compliance risks.</p></li><li><p>Duplicate capacity, local production requirements, bifurcated supply chains and localisation requirements will act as a tax on business.</p></li><li><p>A China-sourced input is strategically risky only when it lacks substitutes, sits in a concentrated supply chain and has a long capability acquisition cycle.</p></li><li><p>India’s opportunity lies in trusted partner status, such as in chip design, GCCs, pharma APIs, electronics, EV and solar value chains.</p></li><li><p>CEOs must undertake a specific exposure mapping across suppliers, technologies, jurisdictions and compliance obligations.</p></li></ul>.<p>The global technology order is moving from integration to managed fragmentation. For three decades, efficiency, specialisation and comparative advantage drove the evolution of technology supply chains. Semiconductor design, fabrication, assembly, critical minerals processing, software development and advanced manufacturing each moved to geographies that could perform one part of the chain better or cheaper. While that model has not entirely disappeared, it now operates under a new constraint: specifically, governments increasingly view technology as an instrument of national power. In this context, Pranay Kotasthane, Deputy Director and Chairperson, High Tech Geopolitics Programme, The Takshashila Institution, framed technology geopolitics as a business problem that CEOs can no longer delegate to policy teams or external affairs functions.</p><h2><strong>Every supply chain is now a geopolitical surface</strong></h2><p>The most important shift is that geopolitics has become deeply entrenched in commercial supply chains. A sourcing decision, technology partnership, product architecture or manufacturing location can today trigger regulatory, reputational or national security consequences. This is most visible in semiconductors, where the industry once moved from vertically integrated firms to a specialised global model because capital intensity became too high for every company to own the full stack. The fabless foundry model created enormous efficiency, but it also created chokepoints – which the US-China technology contest has weaponised. The US is restricting China in areas where China remains weak, especially advanced semiconductors and AI compute. China is responding in domains where it has leverage, especially critical minerals, materials processing and certain advanced manufacturing inputs. However, it would be premature (and perhaps inaccurate) to call this a technology war. Chips, minerals and components still move across borders. What is being seen, instead, is a targeted control regime where countries keep normal trade flowing, but block access to the most powerful and strategically useful technologies.</p><p>This means procurement teams have become geopolitical actors. Input categories such as chips, telecom equipment, AI compute, critical minerals, advanced manufacturing tools and even specialised lab equipment now carry strategic risks. Supply chain resilience can no longer be measured only by cost, delivery time and vendor reliability. Companies must include exposure to export controls, sanctions, end use restrictions, political retaliation and jurisdictional conflict.</p><h2><strong>China’s coercive architecture has become a compliance problem</strong></h2><p>China’s use of economic coercion has become more systematic. By contrast, earlier instances, such as rare earth export restrictions against Japan, were episodic. The current architecture is more formal, legal and operational. Chinese laws and decrees increasingly create risks for firms that comply with foreign sanctions or export controls affecting Chinese entities. This creates a dual compliance conflict for companies operating across US and Chinese jurisdictions. General restrictions, such as controls on gallium, germanium, antimony, graphite, tungsten and other specialised inputs, can affect Indian firms as well. These restrictions are becoming broader and moving further downstream. China’s approach can include processing technology, dual use items, manufacturing tools and even talent movement.</p><p>Companies should conduct a comprehensive China audit that goes beyond a simple supplier list. The audit should identify which inputs are sourced from China, which suppliers are exposed to Chinese law, which products may fall under US or Chinese export controls, and where compliance with one jurisdiction could conflict with another. Legal, procurement and strategy teams need a shared view of this exposure.</p><h2><strong>Resilience will carry a cost</strong></h2><p>Geopolitical fragmentation will impose costs on business. Redundant capacity, domestic manufacturing requirements, localisation rules and bifurcated supply chains may improve resilience, but they also reduce the efficiency gains created by global specialisation. The semiconductor sector illustrates these tensions. The same chips, manufactured outside the most efficient locations, can cost significantly more. For their part, governments may either absorb or impose these costs, because they view technological capability as part of national security.</p><p>Companies should therefore treat resilience as a strategic cost centre before it becomes a competitive advantage. This cost may appear in the form of higher input prices, duplicated vendor bases, additional inventory, altered product design, local data requirements, talent restrictions or separate R&D and IP structures for different markets. The ‘geopolitical enterprise’ will need to manage bifurcation across the value stack, including R&D, supply chains, data, talent and partnerships.</p><p>For many companies, resilience gets tacked on only after a shock. In the current environment, resilience must be built into the operating architecture from the start. This gives enterprises more options, lowers switching costs and increases their bargaining power.</p><h2><strong>Dependence and vulnerability are not the same</strong></h2><p>Not every China dependence is a strategic vulnerability. Rather, firms need to ask themselves three key questions. The first is around substitutability: Can the input be sourced elsewhere or replaced through another design, material or process? The second relates to supply chain dominance: Does China control enough of the relevant segment to make switching difficult? The third looks at capability gaps: How long would it take India or a trusted partner ecosystem to build the required capability?</p><p>These distinctions matter because a blanket decoupling is neither feasible nor desirable. Some dependencies can be managed through alternate sourcing, stockpiling, recycling, efficiency improvements or product redesign. Others, such as advanced lithography or highly specialised semiconductor equipment, are far harder to replace and therefore deserve closer strategic attention.</p><p>Historical experience also shows that coercive leverage can exhaust itself. Restrictions often trigger substitution and innovation. Synthetic rubber, rare earth efficiency gains in Japan, recycling and rare earth free motor development all show that scarcity can accelerate workarounds. China’s export controls may therefore make China+1 more necessary, but they may also reduce China’s long term leverage by forcing firms and governments to build alternatives.</p><h2><strong>India’s opportunity is real, but it requires selectivity</strong></h2><p>India’s position is stronger than it was during earlier technology denial regimes. Its improved relationship with the US, Japan, Europe and other technology powers creates greater scope for technology partnerships and trusted partner roles. India also has assets that matter: semiconductor design talent, GCC depth, software capability, pharmaceutical manufacturing capacity, electronics assembly momentum and growing relevance in EV and solar value chains.</p><p>However, India should not interpret the moment as a call for indiscriminate localisation. New technology sectors differ from older, strategic sectors, such as space and nuclear. They require large output markets, commercial scale, deep supplier networks, high capital intensity and constant reinvestment into the next generation of capability. A semiconductor fab or AI infrastructure stack cannot function merely as a state prestige project, there must be a connection to global demand and supply networks.</p><p>India’s approach to Chinese technology must also be selective. In non-critical areas where India lacks capability, Chinese capital, talent or equipment may help build learnings. In strategically critical areas where India already has emerging capability, greater caution is warranted. The task ahead is the disciplined use of external technology to build domestic strength.</p><h2><strong>The CEO agenda must move from awareness to mapping</strong></h2><p>Geopolitics has doubtless entered the operating model of most firms. It now affects procurement, legal risk, R&D location, product architecture, data strategy, talent mobility and capital allocation. A general awareness of US-China tensions is no longer enough, however. Companies need a practical map of their exposure, including the key China-sourced inputs, chokepoint technologies, single country dependencies, jurisdictional compliance conflicts and areas where substitution is commercially possible.</p><p>The opportunity for Indian firms lies in converting global anxiety into capability. China+1 will not automatically benefit India. Instead, it will benefit companies and sectors that can offer trust, scale, technical competence and policy alignment.</p>
<p><strong>Executive Summary</strong></p><ul><li><p>Technology supply chains carry geopolitical risks across procurement, sourcing, location strategy, partnerships and capital allocation.</p></li><li><p>The US-China contest is essentially selective denial regime.</p></li><li><p>Full decoupling is unlikely, but restrictions at the high end of chips, AI compute, critical minerals and dual use technologies will deepen.</p></li><li><p>China’s coercive architecture has moved from episodic retaliation to an institutionalised legal and regulatory system, creating direct compliance risks.</p></li><li><p>Duplicate capacity, local production requirements, bifurcated supply chains and localisation requirements will act as a tax on business.</p></li><li><p>A China-sourced input is strategically risky only when it lacks substitutes, sits in a concentrated supply chain and has a long capability acquisition cycle.</p></li><li><p>India’s opportunity lies in trusted partner status, such as in chip design, GCCs, pharma APIs, electronics, EV and solar value chains.</p></li><li><p>CEOs must undertake a specific exposure mapping across suppliers, technologies, jurisdictions and compliance obligations.</p></li></ul>.<p>The global technology order is moving from integration to managed fragmentation. For three decades, efficiency, specialisation and comparative advantage drove the evolution of technology supply chains. Semiconductor design, fabrication, assembly, critical minerals processing, software development and advanced manufacturing each moved to geographies that could perform one part of the chain better or cheaper. While that model has not entirely disappeared, it now operates under a new constraint: specifically, governments increasingly view technology as an instrument of national power. In this context, Pranay Kotasthane, Deputy Director and Chairperson, High Tech Geopolitics Programme, The Takshashila Institution, framed technology geopolitics as a business problem that CEOs can no longer delegate to policy teams or external affairs functions.</p><h2><strong>Every supply chain is now a geopolitical surface</strong></h2><p>The most important shift is that geopolitics has become deeply entrenched in commercial supply chains. A sourcing decision, technology partnership, product architecture or manufacturing location can today trigger regulatory, reputational or national security consequences. This is most visible in semiconductors, where the industry once moved from vertically integrated firms to a specialised global model because capital intensity became too high for every company to own the full stack. The fabless foundry model created enormous efficiency, but it also created chokepoints – which the US-China technology contest has weaponised. The US is restricting China in areas where China remains weak, especially advanced semiconductors and AI compute. China is responding in domains where it has leverage, especially critical minerals, materials processing and certain advanced manufacturing inputs. However, it would be premature (and perhaps inaccurate) to call this a technology war. Chips, minerals and components still move across borders. What is being seen, instead, is a targeted control regime where countries keep normal trade flowing, but block access to the most powerful and strategically useful technologies.</p><p>This means procurement teams have become geopolitical actors. Input categories such as chips, telecom equipment, AI compute, critical minerals, advanced manufacturing tools and even specialised lab equipment now carry strategic risks. Supply chain resilience can no longer be measured only by cost, delivery time and vendor reliability. Companies must include exposure to export controls, sanctions, end use restrictions, political retaliation and jurisdictional conflict.</p><h2><strong>China’s coercive architecture has become a compliance problem</strong></h2><p>China’s use of economic coercion has become more systematic. By contrast, earlier instances, such as rare earth export restrictions against Japan, were episodic. The current architecture is more formal, legal and operational. Chinese laws and decrees increasingly create risks for firms that comply with foreign sanctions or export controls affecting Chinese entities. This creates a dual compliance conflict for companies operating across US and Chinese jurisdictions. General restrictions, such as controls on gallium, germanium, antimony, graphite, tungsten and other specialised inputs, can affect Indian firms as well. These restrictions are becoming broader and moving further downstream. China’s approach can include processing technology, dual use items, manufacturing tools and even talent movement.</p><p>Companies should conduct a comprehensive China audit that goes beyond a simple supplier list. The audit should identify which inputs are sourced from China, which suppliers are exposed to Chinese law, which products may fall under US or Chinese export controls, and where compliance with one jurisdiction could conflict with another. Legal, procurement and strategy teams need a shared view of this exposure.</p><h2><strong>Resilience will carry a cost</strong></h2><p>Geopolitical fragmentation will impose costs on business. Redundant capacity, domestic manufacturing requirements, localisation rules and bifurcated supply chains may improve resilience, but they also reduce the efficiency gains created by global specialisation. The semiconductor sector illustrates these tensions. The same chips, manufactured outside the most efficient locations, can cost significantly more. For their part, governments may either absorb or impose these costs, because they view technological capability as part of national security.</p><p>Companies should therefore treat resilience as a strategic cost centre before it becomes a competitive advantage. This cost may appear in the form of higher input prices, duplicated vendor bases, additional inventory, altered product design, local data requirements, talent restrictions or separate R&D and IP structures for different markets. The ‘geopolitical enterprise’ will need to manage bifurcation across the value stack, including R&D, supply chains, data, talent and partnerships.</p><p>For many companies, resilience gets tacked on only after a shock. In the current environment, resilience must be built into the operating architecture from the start. This gives enterprises more options, lowers switching costs and increases their bargaining power.</p><h2><strong>Dependence and vulnerability are not the same</strong></h2><p>Not every China dependence is a strategic vulnerability. Rather, firms need to ask themselves three key questions. The first is around substitutability: Can the input be sourced elsewhere or replaced through another design, material or process? The second relates to supply chain dominance: Does China control enough of the relevant segment to make switching difficult? The third looks at capability gaps: How long would it take India or a trusted partner ecosystem to build the required capability?</p><p>These distinctions matter because a blanket decoupling is neither feasible nor desirable. Some dependencies can be managed through alternate sourcing, stockpiling, recycling, efficiency improvements or product redesign. Others, such as advanced lithography or highly specialised semiconductor equipment, are far harder to replace and therefore deserve closer strategic attention.</p><p>Historical experience also shows that coercive leverage can exhaust itself. Restrictions often trigger substitution and innovation. Synthetic rubber, rare earth efficiency gains in Japan, recycling and rare earth free motor development all show that scarcity can accelerate workarounds. China’s export controls may therefore make China+1 more necessary, but they may also reduce China’s long term leverage by forcing firms and governments to build alternatives.</p><h2><strong>India’s opportunity is real, but it requires selectivity</strong></h2><p>India’s position is stronger than it was during earlier technology denial regimes. Its improved relationship with the US, Japan, Europe and other technology powers creates greater scope for technology partnerships and trusted partner roles. India also has assets that matter: semiconductor design talent, GCC depth, software capability, pharmaceutical manufacturing capacity, electronics assembly momentum and growing relevance in EV and solar value chains.</p><p>However, India should not interpret the moment as a call for indiscriminate localisation. New technology sectors differ from older, strategic sectors, such as space and nuclear. They require large output markets, commercial scale, deep supplier networks, high capital intensity and constant reinvestment into the next generation of capability. A semiconductor fab or AI infrastructure stack cannot function merely as a state prestige project, there must be a connection to global demand and supply networks.</p><p>India’s approach to Chinese technology must also be selective. In non-critical areas where India lacks capability, Chinese capital, talent or equipment may help build learnings. In strategically critical areas where India already has emerging capability, greater caution is warranted. The task ahead is the disciplined use of external technology to build domestic strength.</p><h2><strong>The CEO agenda must move from awareness to mapping</strong></h2><p>Geopolitics has doubtless entered the operating model of most firms. It now affects procurement, legal risk, R&D location, product architecture, data strategy, talent mobility and capital allocation. A general awareness of US-China tensions is no longer enough, however. Companies need a practical map of their exposure, including the key China-sourced inputs, chokepoint technologies, single country dependencies, jurisdictional compliance conflicts and areas where substitution is commercially possible.</p><p>The opportunity for Indian firms lies in converting global anxiety into capability. China+1 will not automatically benefit India. Instead, it will benefit companies and sectors that can offer trust, scale, technical competence and policy alignment.</p>
