17 November , 2022 |

Technology

India announces new semiconductor trade deal with Taiwan

In an unprecedented step forward for India-Taiwan ties, the Indian Chamber of Commerce and Industry has recently signed four MoUs (Memoranda of Understanding) with the Taiwan Institute of Productivity. The three MoUs were signed between ADATA Technologies and the Electronics Industry Association of India (ELCINA); Uwin Nanotechnology and Srikaarya Industries, the Taiwan Environmental Protection Association, and the International Centre for Clean Water, covering the fields of green technology, and, perhaps most critically, semiconductor manufacturing.

Indian interest in semiconductors The deal is particularly critical because semiconductor manufacturing has been an Indian priority for several years now and is closely tied to the government’s flagship Make in India Policy. After supply chain disruptions during the COVID-19 pandemic led to global semiconductor shortages, India has focused on developing its domestic semiconductor manufacturing market, with the Indian Ministry of Electronics and Information Technology (MeitY) launching the Indian Semiconductor Mission last year and the central government allocating $9 billion for its semiconductor ecosystem. This scheme focuses primarily on four areas: setting up semiconductor fabrication factories (fabs), display fabs, ATMP (assembly, testing, marking and packaging) facilities and design-linked incentive schemes (DLI).

Partnership with Taiwan To achieve its goal of making India a ‘global hub of chip design and manufacturing, the Indian government has sought the aid of Taiwan, which is a global leader in the semiconductor industry, accounting for more than 60% of the global chip supply. This has led to greater bilateral Indo-Taiwanese engagement in both cultural and economic spheres: for example, the Gujarat state government has signed a joint venture MoU with Vedanta Ltd. and the Taiwanese firm Foxconn, with the firms agreeing to invest over $18 billion into a semiconductor fab plant in Dholera. In addition, Taiwan plans to establish an exclusive Taipei ‘township’ in the Delhi-NCR to integrate Indian and Taiwanese markets further.

Takeaways The IT industry will be critical for the future of the global economy. Forecast to create around 100 million new jobs by 2025, it is expected to grow at a compounded annual rate of more than 10% for the next five years. Naturally, semiconductor chips are the cornerstone of the industry and are forecast to become a trillion-dollar industry in just 8 years. However, increasing demand for the chips has been stifled by the COVID-19 pandemic and the Ukraine War, both of which have disrupted supply chains vital for this resource-intensive industry. This has made it all the more crucial for India to develop its own semiconductor facilities, which are a must if it is to compete with other global powers in the upcoming decade.

The increased engagement with Taiwan may also reflect the changing Indian attitudes toward China: while India has supported Beijing on its One-China Policy, recent clashes on the LAC in Galwan have seen a rough patch in Indio-Chinese relations. The trade deal may also be motivated by a desire to reduce the country’s reliance on China, which was all too apparent during the early stages of the pandemic, as imports from China continued to rise despite Beijing’s belligerence.

Conclusion Regardless of India’s motives, one thing is clear: the future lies in semiconductors. India must gain a foothold in this vital market to avoid being left behind and bridge the gap between superpowers such as the US and China.

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Picture Credits - Semiconductor Digest

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