By Albin Thomas
The Indian government founded its first state-owned semiconductor enterprise, Semiconductor Complex Ltd,. (SCL), in Mohali in 1984. Despite this, India has not yet achieved a prominent position in the global semiconductor landscape, and no major Indian manufacturers or market leaders compete in the international market. Technological developments and the current geo-political tensions in the Taiwan Strait have further increased the need for India to become a manufacturing hub, and to pursue self-sufficiency in the semiconductor sector.
As a result, the government of India has launched the India Semiconductor Mission (ISM), which is aimed at building a vibrant semiconductor and display ecosystem in order to make India a hub for electronic manufacturing and design. The ISM encourages setting up semiconductor fabs in India and provides fiscal support to a maximum of 50 percent of project costs for approved applicants.
Taiwan manufactures around 63.8 percent of the world’s semiconductors, and its 2nm process technology is the most available advanced technology in the world. Consequently, Taiwan remains the global leader in terms of both technology and productivity in the semiconductor industry. India and Taiwan are increasingly pursuing cooperative initiatives in this field – and India’s technical and skill development cooperation with Taiwanese companies and the Taiwanese government is creating a new face for India’s semiconductor sector.
Notable partnerships with Taiwan in India’s semiconductor industry
The national government of India, as well as different state governments, provide help to private entities to establish semiconductor fabs in India. In this environment, the Taiwanese government and Taiwanese companies have become front runners in helping both Indian firms and the government. In February 2024, Powerchip Semiconductor Manufacturing Corporation (PSMC, 力晶積成電子製造股份有限公司) and the Indian Company Tata Electronics announced plans to invest USD $11 billion to build India’s first 12-inch wafer fab in Dholera, Gujarat. This joint venture between an Indian and Taiwanese company has provided the foundation for India-Taiwan joint manufacturing of chips in India. The new venture is directed towards the manufacture of power management integrated circuits (IC), display driver IC, microcontrollers, and high-performance computing logic components. This project is expected to create more than 20,000 job opportunities.
The Taiwanese company Hon Hai Precision Industry Co. Ltd. (Foxconn, 鴻海精密工業股份有限公司) also has a considerable presence in India, with plants in Bengaluru, Chennai, and Hyderabad. Foxconn and India’s Hindustan Computers Limited (HCL) Group are planning a joint venture to set up a semiconductor outsourced assembly and testing unit. Foxconn is investing USD $37.2 million in the project, and will hold an equity stake of 40 percent. Foxconn’s decision to hold equity will ensure the supply chain resilience for the needs of India’s domestic industry even after the completion of the project.
These partnerships and collaborations between India and Taiwan also encourage more cooperation and dialogue between Indian and Taiwanese companies. In May, the India Taipei Association (ITA), ISM, and India’s Ministry of Electronics and Information Technology jointly organized India-Taiwan Semiconductor Forum. The forum discussed current market conditions for Taiwanese companies and technology providers aiming to strengthen industrial cooperation between Taiwan and India.
During the forum, the All-India Council for Technical Education (AICTE) signed multiple memoranda of understanding (MOUs) between India and Taiwanese academic institutions. These MOUs are directed towards building cooperation on skill development, student exchange programs, and research and development efforts. Some initial successes in the semiconductor sector can already be observed: more than 128 colleges have adopted the curriculum developed by AICTE, and around 8,000 highly skilled individuals are expected to join India’s semiconductor workforce in the coming years through these programs.
The challenges of greater cooperation
Taiwanese companies and private enterprises have experienced multiple challenges in terms of greater cooperation with India, including cumbersome administrative structures, a lack of experienced engineers, high tariffs on electronics component imports, and inadequate infrastructure. Taiwanese companies are hesitant to invest in India due to complex labor laws, environmental regulations, and import/export restrictions. For semiconductor fabs to succeed, they require numerous suppliers for raw materials and components, as well as an unlimited power supply. Establishing a new semiconductor industry and its operations depends on the quality suppliers of raw materials. Although building a reliable supply chain network within India is crucial, it will also take time and investment.
Despite efforts from both the Indian and Taiwanese governments, India has only managed to attract PSMC, a smaller Taiwanese company specializing in memory chips, to establish a full-fledged semiconductor industry. The failure of Foxconn’s attempt to start a semiconductor and display production plant in India with Vedanta shows the difficulties faced by new players entering the Indian semiconductor manufacturing and supply chain. The industry poses significant challenges for new entrants, primarily due to its high capital requirements and the difficulty in obtaining valuable intellectual property.
Opportunities for Taiwan in India’s semiconductor industry
The government of India’s “Make in India” and “Design in India” initiatives encourage investors and manufacturers to start their operations in India with government support. Additionally, the Indian government’s “India Semiconductor Mission” provides up to 50 percent of the project cost, necessary fiscal supports and encouragements for setting up semiconductor fabs and display fabs. Moreover, the 2024 budget allocated ₹69.03 billion Indian rupees (INR) (USD $825 million) to the semiconductor sector and established a USD $12 billion innovation corpus for research and development.
India’s large market and ample workforce provides a growing opportunity for Taiwan and Taiwanese companies. It is estimated that India has 20 percent of the world’s semiconductor design workforce, and its semiconductor market is expected to grow at a compound annual growth rate (CAGR) of 26.3 percent, to USD $271.9 billion by 2032. Taipei’s New Southbound Policy (NSP, 新南向政策) positions countries like India as strategic partners and encourages Taiwanese companies to invest in India. Along with the Indian government’s initiatives, initiatives from the Taiwanese government also provide Taiwanese companies with opportunities to benefit from India’s growing semiconductor market and growing workforce.
Geopolitical implications for India-Taiwan semiconductor cooperation
India’s cooperation with Taiwan in the semiconductor sector carries significant geopolitical implications, particularly in the context of escalating tensions in the Indo-Pacific region. China has been assertive in its claims over Taiwan and has sought to dominate global semiconductor supply chains. By strengthening ties with Taiwan, India can position itself as a viable alternative within the “China Plus One” strategy, which aims to diversify supply chains away from a reliance on Chinese manufacturing.
Collaboration in semiconductor industries aligns with broader strategic partnerships involving the United States and other allies concerned about China’s ambitions. The United States, through initiatives like the CHIPS and Science Act, is keen on reshoring semiconductor manufacturing and reducing dependence on foreign sources, particularly from China. Moreover, strengthening semiconductor ties between India and Taiwan contributes to regional stability by promoting economic interdependence that can act as a deterrent against conflict. A collaborative approach in this high-tech sector could lead to increased dialogue and cooperation among countries sharing similar concerns about China’s expansionist policies.
Conclusion
The increasing collaboration between Taiwan and India in the semiconductor sector holds the promise of transforming India into a key player in the global chip manufacturing ecosystem. While challenges persist regarding infrastructure, human capital, and supply chain problems, the mutual benefits of this partnership make it an essential part of India’s semiconductor ambitions. The failure to attract Taiwan’s semiconductor giants – such as Taiwan Semiconductor Manufacturing Company (TSMC, 台灣積體電路製造股份有限公司) – to India’s semiconductor manufacturing sector is also a challenge that needs to be overcome. With Taiwan’s advanced expertise and India’s determination to build a robust semiconductor industry, the partnership between these two nations could shape the future of global technology and manufacturing.
The main point: It is essential for India to attract Taiwanese companies in order for India to become a semiconductor manufacturing hub. Cooperation with Taiwanese companies provides invaluable technological support to India’s semiconductor industries, and the joint venture between PSMC and Tata Electronics is a promising beginning for further cooperation between India and Taiwan in upcoming years. However, the lack of reliable supply chain networks, a cumbersome administrative structure, and inadequate infrastructure all remain key hurdles to broader cooperation between India and Taiwan in the semiconductor industry.
