India And Taiwan In Talks On Chip Plant And Trade Deal

India and Taiwan are in talks on an agreement that could bring manufacturing to South Asia along with tariff reductions on components for producing semiconductors by the end of the year, according to a report by Bloomberg.

The report states that officials in New Delhi and Taipei have met in recent weeks to discuss a deal that would bring a chip plant worth an estimated $7.5 billion to India to supply everything from 5G devices to electric cars.

India at present, is exploring locations with adequate land, water and manpower and intends to provide financial support of 50% of capital expenditure from 2023 as well as tax breaks and other incentives. Officials in Taipei wanted quick progress on a bilateral investment agreement that would include tariff reductions on dozens of products used to make semiconductors -- a precursor to a broader trade deal also under consideration, according to the report.

The talks become important as they come at a time when democracies across the world are boosting economic and military links to stand up against an increasingly assertive China. While Taiwan has long sought a trade deal with India, officials in New Delhi had been hesitant to anger Beijing, which claims the island democracy as its territory.

India wants to become more self-reliant on chips and for that it has sought to lure high-technology investments. On the other hand, Taiwan wants to strengthen its diplomatic presence around the globe as it pushes back against the pressure from China.

Although Taiwan has welcomed cooperation between the two sides on semiconductors but it has flagged concerns on the supply of water and electricity and has suggested that it may be more feasible for India to start creating a chip design sector first before proceeding to building chip fabrication plants.

Currently India imports almost all semiconductors to meet demand estimated to reach around $100 billion by 2025 from about $24 billion now.

India and Taiwan in 2018 had signed a bilateral investment agreement to promote investment flows and expand economic ties between the two nations. Trade between the two countries stood at $5.6 billion in the fiscal year ended March, according to India’s trade ministry.