Amid escalating geopolitical tensions and the ongoing trade conflict between China and the United States, James Huang, Chairman of the Taiwan External Trade Development Council, stated that Taiwanese companies are shifting their supply chains from China to India.
In an interview with Reuters on Monday, July 15, Huang disclosed that the trade conflict between China and the US has led to increased foreign direct investment (FDI) from Taiwan in India, rising to over $665 million in the five years leading up to 2023. In comparison, Taiwan’s FDI in India was only around $277 million during the decade from 2006 to 2017.
“It is clear that more and more Taiwanese companies are relocating their supply chains out of China and establishing them in India,” he added.
Despite its small geographical size, Taiwan holds significant influence on the global stage. Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest advanced chip manufacturer, and the Taiwan Strait is one of the important maritime routes worldwide. While India and Taiwan do not have formal diplomatic relations, they have built close commercial ties. The Modi government has been seeking to compete with the CCP in the manufacturing sector and is expected to attract more investments from Taiwan to promote industrial development.
“We have plans to bring Indian students and talents to Taiwan for semiconductor training, which will pave the way for our future collaboration,” Huang said, adding that the shift in Taiwan’s supply chain is mainly focused on the mobile phone assembly industry and shoe industry.
In the fiscal year ending in March 2024, the bilateral trade volume between India and Taiwan stood at $10.1 billion.
In recent years, China and India have seen several border disputes. In June 2020, a physical clash between Chinese and Indian troops in the Galwan Valley in Ladakh led to the deaths of 20 Indian soldiers, with casualties on the Chinese side as well, though the official numbers were not disclosed by the Chinese authorities.
The border conflicts have deteriorated the relations between the two countries. India has discouraged its own companies from trading and investing with China, imposing a nationwide ban on numerous Chinese apps, reducing visas issued to Chinese citizens, and introducing a series of measures to actively attract businesses of foreign companies moving out of China.
Simultaneously, relations between China and Taiwan have also worsened. The CCP has asserted its intention to unify Taiwan, vowing not to abandon the option of military force, while the Taiwanese government rejects China’s sovereignty claims and maintains that only the people of Taiwan can decide their future.
The escalating geopolitical tensions and the unstable manufacturing environment in China have had a significant impact on businesses operating there. A report by Nikkei Asian Review in May last year revealed that Taiwan’s contract manufacturers for companies like Apple are shifting production away from mainland China. These companies are investing in production bases with lower labor costs and smaller geopolitical risks, such as Vietnam and India.
This year, Powerchip Semiconductor Manufacturing Corp in Taiwan collaborated with Tata Group in India to establish the first semiconductor manufacturing plant in the Gujarat state in western India, leveraging a $10 billion incentive program.