The Emerging U.S.-India Innovation Partnership: “Building a Deep Democratic Ecosystem with High Technology”

By Alexander Kersten

On January 31, President Biden’s national security adviser Jake Sullivan met with his Indian counterpart Ajit Doval at the White House to formally launch the Initiative on Critical and Emerging Technology, or iCET. This move cements a commitment made in May 2022 by President Biden and Indian prime minister Narendra Modi for cooperation in semiconductors, 5G and 6G wireless infrastructure, and in defense and military technologies.

While engaged in a strategic competition with China, the United States should not overlook India’s advancing innovation economy and that nation’s own strained relations with China. India’s innovation ecosystem today is one of the largest and fastest growing in the world. With India assuming the presidency of the G-20 this year, senior Indian officials have telegraphed a desire for a global order that better reflects India’s growing technological and economic stature and its role as a leader in the Global South. At the same time, due to its natural complements with the American innovation ecosystem and its strategic role as a counterbalance to China in the Indo-Pacific, Biden administration officials have noted that supporting India’s rise has bipartisan support in Washington, an uncommon occurrence.

Taken together, the launch of iCET could be a pivotal moment for both the U.S. and India. In an era of “friend-shoring” and the rewiring of global supply chains, U.S. policymakers and innovative firms are paying close attention to India’s potential as a strategic partner in innovation.

Breaking with Decades of “Non-Alignment”

On November 29, 2022, India’s minister of external affairs Subrahmanyam Jaishankar opened the seventh Global Technology Summit, co-hosted by the External Affairs Ministry and the Carnegie India think tank in New Delhi, by noting how India’s overall rise is linked to its technological rise, especially regarding telecommunications, advanced manufacturing and semiconductors, and emerging technologies. In his speech, Minister Jaishankar added that India must stop pretending that technology is somehow neutral, asserting that in fact it is “no more neutral than economics or any other activity.”

For several decades following its independence from British colonial rule in 1947, India pursued a foreign policy of “non-alignment” that sought autonomy from the U.S.- and Soviet-led blocs of the Cold War era. Yet, Minister Jaishankar argues that the high stakes of today’s global technological competition mean that India’s global technological ambitions need to face the realities of a multi-polar world, a sentiment which seems to echo the Modi government’s growing interest in working with the U.S. on issues of security and technology. With the 2017 revival of the “Quad,” the almost twenty-year old Quadrilateral Security Dialogue that India has with Australia, Japan, and the United States, it is clear that India will play a larger role in the security architecture of the Indo-Pacific.

Filling the China Void

Since COVID-19 emerged in late 2019, China’s strict lockdowns and erratic behavior have worried investors’ confidence in the world’s second-largest economy. Although Beijing has lifted its “Zero-COVID” lockdown policies and toned down the aggressive and nationalist rhetoric of its “wolf-warrior” diplomats, Xi Jinping’s unprecedented third term, rubber-stamped at the recent 20th Party Congress, has definitively ended the hopes of many observers that China might one day become a “responsible stakeholder” in the international system—let alone an open or democratic one. These reasons, along with the Chinese government’s targeting of Western firms and increasingly belligerent stance on unification with Taiwan have led many multinational companies to actively decamp operations from China to friendlier markets in the Asia-Pacific region.

India is beginning to see the benefits of this shift in private sector calculations. Though American tech giant Apple had already begun manufacturing older iPhone models in India, in September 2022 it announced a sweeping change to begin manufacturing its newest model—the iPhone 14—in India. A violent worker protest at the Taiwan-based manufacturer Foxconn’s plant in the central Chinese city of Zhengzhou in November 2022 has already pushed Foxconn to invest $500 million in India. Additionally, Foxconn—of which Apple is a major client—seeks to produce 25 percent of all iPhones in India by 2025, according to Indian minister of commerce & consumer affairs Piyush Goyal—while moving significant manufacturing of other Apple products away from China to Vietnam and other Southeast Asian countries. This trend is expected to accelerate  with the United States’ unprecedented imposition of export controls targeting China’s semiconductor industry in late 2022.

India for its part continues to woo foreign investment in advanced manufacturing. Taking advantage of Indian prime minister Narendra Modi’s “Make In India” initiative, semiconductor firm executives, including Intel CEO Pat Gelsinger, traveled to India in 2022 to discuss plans for technology transfer and joint ventures with local partners for the construction of new semiconductor fabrication plants—or “fabs”.

Indian leaders also recognize the need  to be a viable and cost-competitive semiconductor and advanced manufacturing alternative to China. As India’s minister of state for electronics and IT Rajeev Chandrasekhar claims, India must become a “trusted partner” to the U.S. by providing the key workforce, resources, and infrastructure necessary to maintain this costly industry. Further, it must have in place the parallel domestic research and development (R&D) infrastructure to ensure that its innovative capability keeps pace with the technological development required to run these semiconductor fabs.

The India Semiconductor Mission, established in 2019 by the Indian government as part of its the “Make in India” campaign, is a key effort in this regard. This initiative plans to provide the resources and opportunities necessary to build a national semiconductor ecosystem in India, and has so far resulted in two semiconductor manufacturers agreeing to build fabs in India this year.

Leveraging India’s Potential

As American, Japanese, and other Western firms continue to invest in India at China’s expense, Western perceptions of India are changing as well, strengthened by the robust participation of the Indian diaspora in high technology research and development, entrepreneurship, and corporate management. As China’s fissures with the United States widen, the number of Indian students studying in the U.S. reportedly surpassed the number of Chinese students in 2022. Overall, there are signs of increased collaboration between American and Indian universities, with Purdue University and IIT Madras recently launching a dual-degree master’s program on semiconductors.

By its sheer size alone, India’s undertakings will always make a global impact, whether on international supply chains or the composition of foreign students in American universities. India’s fundamentals are strong as an emerging global technology leader and partner. India is the world’s sixth-largest economy by gross domestic product (GDP), and it will overtake China this year as the world’s most populous nation—and with more favorable demographics. It is also the globe’s second-largest awarder of science, technology, engineering, and mathematics (STEM) degrees, as well as global leader in university graduates overall. These assets converge at a significant moment. With the geopolitical status quo rapidly shifting, India too is at an inflection point that could see it move closer to the U.S. and to leveraging its innovation economy to accelerate its growth.

In his January 31 speech, Sullivan noted that for the strengthening U.S.-Indian relationship “a big part of the story is fundamentally about a bet on high tech and an industrial innovation policy. That’s at the core of the president’s entire approach to his presidency. So the China-Russia factors are real, but so is the idea of building a deep democratic ecosystem with high technology.” The geopolitical lines are being redrawn, and this time, India is partnering with the United States to realize its vast potential as an innovation-driven twenty-first century economy.

Alexander Kersten is the deputy director and fellow with the Renewing American Innovation Project at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Alexander Kersten
Deputy Director and Fellow, Renewing American Innovation Project