TAIPEI CITY: India accelerates talks with Taiwan on chip plant, trade deal

TAIPEI CITY: India and Taiwan are in talks
on an agreement that could bring chip manufacturing to South Asia along with
tariff reductions on components for producing semiconductors by the end of the
year, people familiar with the matter said, a move that may spark fresh
tensions with China.

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, the people said.

India is currently studying possible locations with adequate land, water and
manpower, while saying it would provide financial support of 50% of capital
expenditure from 2023 as well as tax breaks and other incentives, the people
said.

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,
the people said.

The people asked not to be
identified to discuss negotiations that were currently ongoing. The Office of
Trade Negotiations under Taiwan’s cabinet declined to comment, while a
spokesperson for trade ministry didn’t immediately respond to a text message.

The trade talks 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.

The discussions have accelerated in recent weeks as US President Joe Biden
seeks to shore up supplies of chips, strengthen supply chains among democracies
and improve military capabilities in the region.

On Friday, he’ll host Prime
Minister Narendra Modi along with the leaders of Australia and Japan as part of
the Quad meeting, a group that is countering China’s influence.

India has also taken a bolder stance against China since a protracted border
standoff following violent clashes in 2020 in which at least 20 Indian and four
Chinese soldiers were killed.
While India and Taiwan are laying the groundwork to discuss a comprehensive
trade deal covering goods, services and investments, officials in Taipei are seeking
to revise the investment deal to show some early progress.

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

Beijing has vowed to work toward unifying the island democracy with the
mainland, even by force if necessary.

Chip shortages have delayed the much-anticipated launch of a smartphone by
billionaire Mukesh Ambani’s Reliance Industries Ltd that has been co-engineered
with Google.

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

Taiwan has welcomed cooperation
between the two sides on semiconductors although it is still evaluating the
proposal given a lack of ecosystem for setting up a chip fabrication plant in
India, people familiar with the matter said.

The Taiwan side has flagged
concerns on the supply of water and electricity, and suggested that it may be
more feasible for India to start creating a chip design sector first before
proceeding to building fabs, according to one of the people.

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