This photo taken on March 25, 2021, shows a factory of Taiwanese semiconductor manufacturer TSMC at Central Taiwan Science Park in Taichung. India could become a manufacturing hub for Taiwanese companies. Photo: AFP / Sam Yeh

As the world gets back on its feet from the Covid-19 pandemic while reeling under a global chip shortage, Taiwan has become an important geopolitical focal point. Taiwan’s stranglehold over the semiconductor industry and its overall technology expertise have demonstrated its strategic importance in the global world order.

Taipei’s New Southbound Policy was envisaged by President Tsai Ing-wen to enhance cooperation between Taiwan and other major states in Southeast and South Asia. India, on the other hand, formulated the Act East Policy as a major diplomatic initiative to promote economic strategic relations with other states in the Indo-Pacific region.

With both India and Taiwan looking to deepen diplomatic ties in their respective regions, now would be the opportune time for the two states to forge an alliance built on common interests.

Technology as a key driver

It was reported this month that Indian and Taiwanese officials met to discuss a possible collaboration on building a semiconductor manufacturing facility in India. An investment of US$7.5 billion was reportedly offered by Taiwan in exchange for liberal trade tariffs on semiconductor manufacturing materials to build a state-of-the-art fabrication facility in India.

With the Quadrilateral Security Dialogue focusing on securing the semiconductor supply chain, Taiwan’s expertise in that domain could serve as a base for developing a robust technological partnership with India. 

The Asian Silicon Valley Development Plan was created by the Taiwanese government in 2016 with two primary objectives: first, promoting research and development for Internet of Things (IoT) devices, and second, improving Taiwan’s entrepreneurship ecosystem.

With states looking to create technological partnerships to counter China’s rise, India can look toward Taiwan’s plan to grow both its technical expertise and ensure its presence in cutting-edge technology research. 

Taiwan’s exports have been dominated by electronic hardware components, which have driven its overall trade and created a huge surplus. India’s ever-growing demand for high-technology products, especially in the coming decades, could help bring it and Taiwan to the table to negotiate a deal that would economically benefit both states.

As technologically developed states, India and Taiwan should look at the strategic implications of emerging technologies as potential areas of collaboration in the future.

Economy and education

Despite being two of the fastest-growing economies in the world, the economic partnership between India and Taiwan is still in its infancy. Taiwanese investments in the subcontinent are yet to approach the level of mainland China’s.

The minimal economic opportunities, coupled with some inherent fallacies of the Indian economic system, have discouraged Taiwanese investors from pursuing big-budget projects in the country. Complicated tax regulations, corruption, language barriers, and insufficient understanding of each other’s business environments have prevented potential economic partnerships between them. Eliminating these barriers would help bolster growth and increase opportunities for investment. 

Moving beyond government-to-government relations is the need of the hour. The private sectors in both India and Taiwan have the ability to collaborate in multiple areas. As well, there is an opportunity for the education sectors in both states to foster people-to-people relationships and help the next generation get better opportunities.

Universities must look to set up additional campuses and research facilities in order for young researchers to work together on emerging and critical technologies. While Taiwan has already established around 11 Chinese-language learning centers in India, exchange programs and better scholarship opportunities could help improve the student fraternity in both states.

While Indian students have the opportunity to learn the local language of Taiwan, language is one of the main barriers for Taiwanese students in a multilingual society like India. Arrangements must be made to attract young people from Taiwan to pursue higher education in India. Improving educational ties could eventually lead to better diplomatic relations. 

The priority of manufacturing

Innovation in Taiwan has reached exemplary levels along with corresponding patent activity. With intellectual capital, there is a need for human resources to translate this into tangible goods and services.

India, with its abundant human capital and the government looking to improve the manufacturing sector, could serve as a perfect destination for Taiwanese companies looking to set up manufacturing plants. This could also help resolve trade barriers. 

With agriculture dominating the workforce in India, modernization in the field of agriculture by Taiwan could help Indian farmers get access to improved machinery and other equipment at affordable prices if these companies manufacture their products in India.

Despite being a powerhouse in the pharmaceutical industry, India can still look to become a global leader in manufacturing drugs for states like Taiwan that have the intellectual capital and rights to do the same. And there are other industrial supply chains for which India could act as a manufacturing hub for Taiwanese companies. 

India-Taiwan relations have improved significantly since the 1990s despite the lack of official diplomatic ties. The trade volume between the two has shown considerable growth, with a steady annual increase.

There have also been talks of technology transfers in critical industries between Indian and Taiwanese companies that could act as a counterbalancing mechanism to China’s rapid technological rise.

Relations between India and China are at an all-time low after the border skirmishes last year in eastern Ladakh. Recent aggression by China against Taiwan has also resulted in Western allies such as the United States sending warships into the Taiwan Strait.

India and Taiwan, which share democratic values and common economic interests, have an opportunity to deepen their ties both militarily and economically. This is a must for a free and open Indo-Pacific region. 

Arjun Gargeyas

Arjun Gargeyas is a research analyst at the Takshashila Institution, a public policy think-tank in Bangalore.