India and Taiwan are preparing to antagonize China. Reportedly, the two friendly nations have started negotiations to chalk a free-trade agreement to make the bilateral relations stronger. The negotiations come fresh on the heels of New Delhi’s open invitation to Taiwan to come and set its semiconductor factories in India.
China does not recognize Taiwan as an independent nation and continues to bully it. However, Taiwan, in the last one and a half years, under the Presidentship of Tsai Ing-wen has batted on the frontfoot with India providing the cover support. The signing of the FTA could be a big moment in India’s departure from the ‘One China” policy. India gave Taiwan a hand to come to the country and it has dearly held on to the opportunity.
Set up a chip plant in India – Modi government to Taiwan
As reported by TFI, the Modi government has been in advanced talks with Taiwan over bringing a semiconductor chip plant worth an estimated $7.5 billion to India to supply everything from 5G devices to electric cars.
Ever since the pandemic began, the rise in demand for electrical equipment has led to an increase in the demand for semiconductors.
Taiwan’s leading semiconductor producers, including the Taiwan Semiconductor Manufacturing Company (TSMC) and the United Microelectronics Corporation (UMC), may implement the mega project.
Till now, Taiwan has only set up one semiconductor plant outside and it is in the USA. Experts’ privy to the matter have weighed their opinion by stating, “The semiconductor plant in the US was set up in the reflection of the close strategic ties between the two sides. It will be the same in India’s case as well,”
Taiwan wants to diversify its portfolio
The global semiconductor shortage has prompted manufacturers to diversify their country portfolios and set up bases in various nations. Interestingly, manufactures are looking to manufacture in a country that incentivizes them, minus China.
The Communist nation is nowhere in the picture when it comes to attracting microchip manufacturers, and India is taking advantage of the same.
Like India — for China too, semiconductors are an indispensable product. And in the last few months, China has also pushed for indigenous manufacturing of semiconductors because the Trump administration crippled its electronics industry with a ban on the export of American-designed models to China.
China is desperate for semiconductors
However, the lack of engineering talent which only relies on copying and aping foreign tech has not been able to come up with anything substantial. Albeit, such has been the thirst for semiconductors that China has engaged in industrial espionage and talent-poaching to offset the semiconductor shortfalls.
However, wary of the threat, Taiwan has asked staffing companies to remove all listings for jobs in China. This is a deliberate move by Taiwan to avoid the outflow of Taiwanese talent to China.
Why are semiconductors crucial?
Usually made of silicon, Semiconductors are a strategic technological asset in today’s globalised world. From car batteries to laptops to smartphones to household appliances to gaming consoles and everything in between, semiconductors perform the fulcrum of the job in powering smart electronic devices.
The global semiconductor industry is valued at around 481 billion dollars as of 2018 and is dominated by companies from South Korea, Taiwan, and Japan, all of which happens to be India’s friends.
India needs semiconductors for its growth story
Semiconductors are a strategic asset and manufacturing semiconductors is a tedious as well as an arduous process. It takes months and 24/7 factory shifts to churn out the semiconductors.
India, which sits on the cusp of a Capex cycle cannot idly sit and wait for the semiconductor supply to resume. More than 7 lakh car units are pending in India due to the shortage of semiconductors.
Modi government approves Semiconductor scheme
While the trade deal is in the process of being signed, the Modi government last week approved Rs 76,000 crore incentive scheme for semiconductors.
The huge chunk of capital will help in setting up of semiconductor design, manufacturing and display fabrication (fab) units with a larger goal of making India a global electronics production hub.
The move would further India’s ambitions to be self-reliant in electronics manufacturing, bring massive investments and result in 35,000 specialized jobs apart from indirect employment for one lakh people.
Read More: PM Modi begins leading India towards a semiconductor revolution
Recently, at the first-ever in-person Quadrilateral Security Dialogue, or what is more commonly known as the Quad, the ally countries, Japan, Australia and the USA, along with India have decided to end China’s global domination dreams with a single move and that is by restructuring the semiconductor supply chains.
If Taiwan sets up a plant in India, China will have to inadvertently crouch in front of New Delhi for the precious chips. This will be a double whammy as Beijing will be indirectly accepting that Taiwan is not a part of its territory, which may not feel as bad as asking India to bail it out.