In India’s case in particular, greater collaboration with Taiwan could be achieved through direct cooperation with the state governments in India. State governments are also working as conduits of Taiwanese investment in India. In comparison to the central government, state governments have more autonomy to engage Taiwan that is accompanied with stable state governments, investment-friendly policies, abundant manpower, and adequate infrastructure.
State governments in India are competing among each other to secure investments from Japan, South Korea, and Taiwan. Most recently, a Telangana Government delegation visited Taiwan to talk to the representatives of the semiconductor industry. Wistron, which already has a substantial presence in Karnataka, is looking to expand to other states in India and Telangana could be a potential destination for companies like Wistron.
While state governments have been able to strengthen business ties with and attract investments from Taiwan, the central government has launched several policies to attract supply chains specifically focusing on electronics manufacturing, semiconductors, and electric vehicles.
- The Production-Linked Incentive (PLI): Launched in 2021, the PLI aims to boost domestic manufacturing across 14 key sectors. Pegatron established an Apple manufacturing unit in Chennai under the PLI scheme. In 2021, Foxconn and Wistron were further approved for the PLI scheme. Such schemes are lucrative for companies that are looking for easy access to and expansion in the Indian market in the post-pandemic period.
- India’s Semiconductors and Display Fab Ecosystem: India is attempting to build an effective semiconductor ecosystem, and the target countries involve South Korea and Taiwan. With an initial investment of US$ 10 billion as part of the Production-Linked Initiative, a comprehensive program for the development of semiconductors and display manufacturing ecosystems in India was announced by Modi. As India is trying to transform itself into a chip manufacturing hub, such incentives are beneficial for the country to attract chip companies. What makes these policies important is that India still does not have any semiconductor fabrication plant needed to manufacture chips. This is where such policies will prove instrumental in attracting Taiwanese companies. However, while this plan seems ambitious, it remains to be seen if this could prompt Taiwanese businesses to seriously consider India.
- Electric Vehicles (EV) Supply Chain: There are efforts to promote India as a manufacturing hub for EVs. There is a growing demand for relatively affordable electric vehicles in India. As per India’s Society of Manufacturers of Electric Vehicle (SMEV), “in 2021, 236,803 cars, including 143,837 secondhand electric motorcycles, 88,378 electric tricycles, and 4,588 electric four-wheeled cars and buses”. Developing EV supply chain in India serves a dual purpose of addressing the challenge of degrading air quality in the country and domestic consumption.
There exists complementarity between India’s software skills and Taiwan’s hardware capabilities, and this partnership could help India in upgrading its EV supply chain. As a concrete first step that suggests a trend might be picking up in the sector, Taiwan’s Gogoro, a battery-swapping technology success story, is venturing into the Indian market with India’s Hero Motocorp.
Challenges, opportunities, and consequences for Europe
This development is good news for India, signaling a new chapter in India-Taiwan relations, a fillip to building India’s chip ecosystem, and most importantly, a potential step to making India an important destination for an alternative supply chain. There is a strong case for Taiwan and India to collaborate. There are mutual complementarities, and as the two sides are reducing their dependence on China, this partnership has merit and potential.
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