India are accelerating talks with Taiwan on establishing an agreement that could bring chip manufacturing to the South Asia country along with trade deal that could reduce tariff on component for producing semiconductor by the end of this year.
The chip plant is estimated to be worth US$7.5 billion and will supply everything from 5G devices to electric cars. India will provide financial support of 50% of capital expenditure from the year 2023 onwards as well as other incentives which includes tax breaks.
The deal can be seen as a win-win for both countries as India has sought to lure in high-technology investments to become more self-reliant on chips, meanwhile Taiwan will be able to strengthen its diplomatic presence around the globe amid pressure from China.
Chip shortages in India have resulted in delay of the much anticipated launch of a smartphone by India’s billionaire Mukesh Ambani that has been co-engineered with Google. At present, India imports almost all of its semiconductors to meet demand estimated to reach around US$100 billion by 2025 from about US$24 billion now.
The cooperation between the two sides are on an advanced level although Taiwan is still evaluating the proposal given a lack of ecosystem and facilities in setting up a chip fabrication plant in India. Supply of water and electricity have been flagged as a problem and it has also been suggested for India to start creating a chip design sector first before processing to build fabs.
In 2018, India and Taiwan signed a bilateral investment agreement to promote investment flows and expand economic ties between the two nations. In March 2021, it was reported that trade value between India and Taiwan stood at US$5.6 billion.