Semiconductors are the backbone of modern technology and remain indispensable across multiple products, services and manufacturing processes. However, the Semiconductor Supply Chain (SSC) has several challenges and vulnerabilities. These highlight the crucial need for increased resilience and proactive planning to avert future disruptions.

Government incentives and policy efforts also seek to assist the semiconductor industry by addressing the issues such as lack of skilled workers and innovation to meet the rapidly evolving demands of technology. As India advances to build a robust semiconductor ecosystem, fostering collaboration with the already established global semiconductor hubs like the US, Japan and Taiwan remain crucial.

Nevertheless, in an evolving global order marked by strategic competition, it is equally critical to understand whether New Delhi has the ability to develop into a significant global semiconductor hub in the midst of a Cold War 2.0 between the US and China that also involves semiconductors. Through its Amrit Kaal vision, India, the world’s largest democracy, has already placed a strong emphasis on initiatives like Atmanirbharta, which translates to "be more self-reliant and dependent on indigenously built products." The "India Semiconductor Mission (ISM)" was launched in December 2021 as part of the “Program for Development of Semiconductors and Display Manufacturing Ecosystem”, to ensure smooth and efficient implementation of the government initiatives.

As New Delhi aspires to move up in the value chain of semiconductor manufacturing, Taiwan stands out as a crucial partner. It established the Industrial Technology Research Institute (ITRI) in 1973 and the RCA Project in 1976 was instituted to facilitate the transfer of technology from the US. This enabled Taipei to create its first integrated circuit (IC) production line. By 1987 Taiwan was successful in creating Taiwan Semiconductor Manufacturing Company (TSMC), the world’s most advanced semiconductor foundry. Between 2000 and 2010, Taiwan became a leader in global semiconductor supply chain and in August 2022, Taiwan officially launched the Southern Taiwan Semiconductor Corridor in the Kaohsiung and Tainan regions. Taiwan produces 3nm and 2nm nodes and in 2024, the global semiconductor foundry market was dominated by TSMC with a share of 64.9 percent. In the above backdrop, it is important for India to learn from Taiwan’s semiconductor journey. The Taiwanese company PSMC has completed the “Definitive Agreement” with TATA Electronics with a total investment of $11 billion (Rs 91,000 crores) to establish a fabrication plant in Dholera in Gujarat. Furthermore, a joint venture between HCL and Foxconn has been encouraged by the Indian government to set up a plant in Jewar, Uttar Pradesh which could attract Rs 3,706 crore in investments making it the sixth project under the $9.16 billion (Rs 76,000 crore) ISM.

In this context, understanding the broader dynamics of the US-Taiwan and China-Taiwan relationships is essential. Taiwan’s advancement in technology remains one of the factors contributing to its strained relationship with China. New Delhi remains a little more cautious to avoid provoking any kind of hostility from Beijing. However, New Delhi seeks to carefully balance its foreign policy priorities with Taipei considering the latter’s expertise in the semiconductor industry.

Taiwan has emerged as one of its most significant economic partners. Despite their interests, New Delhi's efforts to attract TSMC investments have not been entirely effective. TSMC shows little interest to invest in greenfield fabrication in India and is instead focused solely on the US market, including Japan and Germany.

There are challenges from Indian side too. New Delhi exhibited caution regarding a potential free trade agreement (FTA) with Taiwan. Despite Taiwan’s eagerness to start an FTA with India, New Delhi did not show much interest, given the geopolitical landscape. India believed that signing such an agreement might lead to diplomatic fallout with China.

Furthermore, semiconductor manufacturing is an infrastructure and capital intensive industry and India still lags in ensuring an uninterrupted power supply and lacks sufficient investments. Although India has a pool of skilled labourer but semiconductor engineers with expertise in process technology and device physics are in short supply.

The semiconductor supply chain of India is still evolving. Taiwan is initiating a supply chain integration initiative with Japan which would enable the regional semiconductor companies to supply components to TSMC in Japan. The focus is also to develop an industrial park in Kyushu. This shows that Taiwan looks forward to investing in countries that offer a conducive platform for its interests. Such an integration in the semiconductor supply chain and an enabling platform needs to be developed in India to foster collaboration.

India could create a dedicated “India Taiwan Semiconductor Desk” within the Ministry of Electronics and Information Technology (MEITY) to look into the Taiwan specific concerns in terms of regulations and investments. The robust schemes like “Production Linked Incentives (PLI)” and “Design Linked Incentives (DLI)” can be the catalysts. Co-development could be one of the aspects where New Delhi might invite Taipei to create semiconductor parks in Gujarat, Assam or Tamil Nadu. There could be more collaboration with Taiwanese universities, research institutions like ITRI and firms like TSMC, UMC to boost Research and Development. As a QUAD member, New Delhi could encourage collaboration with Taiwan in ‘Critical and Emerging Technology (CET)’ vertical of the QUAD.

There are numerous potential areas where both India and Taiwan can collaborate in the semiconductor sector. India has a pool of skilled labourer, a growing market, and a strong political will which can attract the global semiconductor leaders like Taiwan. If New Delhi focuses on addressing the existing gaps, it could emerge as a global hub for semiconductors and achieve its vision of Vikshit Bharat 2047.

Dr. Ulupi Borah is a Distinguished Fellow at the Centre for Joint Warfare Studies, HQ Integrated Defence Staff, New Delhi.