More than sophisticated arms and weapons, Taiwan’s technological prowess could prove very useful while dealing with China. And here, India can play a supporting role, which could be highly beneficial for New Delhi.
A theory gaining currency in the strategic circles is that China, notwithstanding all its threatening postures, will not invade Taiwan for a violent takeover of the island if it realizes that in the process, the latter’s semiconductor industry that produces nearly 90 percent of advanced semiconductor chips for the world, including China, is destroyed completely.
China itself will suffer a monumental loss if Taiwan, when attacked, destroys, as per its “porcupine strategy,” the chip industries before they are captured. After all, the Chinese strategic economy is also critically dependent on Taiwanese firms.
However, in the other application of Taipei’s technological prowess, India is emerging as an important factor.
Since 2016, when Tsai Ing-wen became Taiwan’s President, the island nation has been trying to lessen its excessive dependence on China as a destination for trade and investment.
All told, Taiwan is one of the biggest investors in China. Between 1991 and the end of December 2021, approved investment in China comprised 44,823 cases totaling US$198.28 billion. In 2021, the value of cross-strait trade was US$273.06 billion.
But, over the last few years, Taiwanese companies are also diversifying and ramping up investments under Tsai’s “New Southbound Policy” in other parts of the world, particularly in Singapore, Vietnam, and neighboring countries in Southeast Asia. This has led to what is called “economic decoupling with China.” The obvious loser in this game is China.
New investments in China by Taiwanese companies declined 10.4% year on year in the first quarter of 2023 to $758 million, according to the latest data released by Taiwan’s Investment Commission. The corresponding drop last year was 14 Percent.
On the other hand, in 2022, Taiwanese investments in Southeast Asia were said to be about 35% of its total investment abroad, “outstripping investment in China for the first time.”
Similarly, the growth rate of Taiwanese exports of electronic products, including semiconductor chips, to China and Hong Kong has decelerated from 24% in 2020 and 2021 to 11% in 2022. In comparison, the growth rates of Taiwan’s exports of electronic products to Southeast Asia and India accelerated greatly—by 21% and 72%, respectively, according to Taiwan’s Ministry of Finance.
The sharp rise in exports to India may be explained by one fact. Though the flows into mainland China have plateaued and even show signs of decreasing, Taiwan has found it difficult to significantly increase foreign investment into Singapore, Vietnam, and other countries in Southeast Asia, vying to become alternatives to China.
India, like Australia and New Zealand, had also figured out the text of Taiwan’s “New Southbound Policy.” But so far, the trend was Taipei’s greater concentration on Southeast China. This trend is now showing changes, with India now getting increased attention.
In a clear signal that Taiwan wants its ties to go up with India, Taipei early this month announced that it would expand its presence in the country by opening a representative office in Mumbai next year.
The Mumbai Taipei Economic and Cultural Center will be Taiwan’s third in India; it has one in New Delhi and one in the southern city of Chennai. The one in New Delhi is virtually Taiwan’s embassy in the absence of formal diplomatic ties under India’s recognition of the “One-China policy.” Similarly, New Delhi’s office in Taipei, the India-Taipei Association, is headed by a senior Indian diplomat.
Taiwan’s Foreign Affairs Ministry has said that opening a center in Mumbai aimed to advance further “substantive ties” with India and “deepen exchanges and cooperation.”
It has been noted that “Since the TECC in Chennai was set up in 2012, nearly 60 percent of all Taiwanese businesses investing and opening factories in India have chosen to develop their operations in southern India. Chennai and its surrounding areas have thus benefited from the investments made by Taiwanese manufacturing industries. The establishment of the TECC in Mumbai is expected to have a similar effect in Western India.
“India became the world’s fifth-largest economy in 2022 and became the most populous nation this year. With its enormous market and related business opportunities, India has become a major global enterprise investment destination.
Mumbai is the largest city in India, serving as the country’s financial center and boasting its largest port. Many countries have established consulates in Mumbai, including the United States, Japan, the United Kingdom, and Australia.
“The TECC in Mumbai will help expand mutually beneficial trade and investment opportunities between Taiwan and India. Taiwan’s New Southbound Policy will also promote exchanges and cooperation in science and technology, education, culture, and people-to-people ties between Taiwan and Western India. Furthermore, the TECC in Mumbai will provide visa services, document authentication, and emergency assistance to businesspeople, tourists, and Taiwanese nationals in the states of Maharashtra, Goa, Gujarat, and Madhya Pradesh, as well as the union territory of Dadra and Nagar Haveli and Daman and Diu.”
So far, Taiwanese investments in India are insignificant and Taiwanese companies have a relatively small footprint in the country. Bilateral trade between the two countries has risen very slowly; it grew from a bit more than $1 billion in 2001 to $8.5 billion in 2022.
Boosting India-Taiwan Trade
But this state of affairs could change. Kao Shien-Quey, Deputy Minister for Taiwan’s National Development, told a group of international journalists in Taipei on July 2 that “there is a huge scope of collaboration between New Delhi and Taipei in areas of emerging and critical technologies, including manufacturing of semiconductors and electronics equipment.”
He added that leading Taiwanese tech giants are looking at India as a key destination to boost their global supply chains.
If C.C. Chen, Taiwan’s Vice Minister at the Ministry of Economic Affairs (MOEA), is to be believed, in 2022, chemicals accounted for 22.9% of Taiwan’s exports to India, followed by plastics and rubber products, as well as electronics components and parts, both at 17.5%. Machinery parts made up 10.2% of the total exports.
However, in early 2023, there was a significant shift as electronic parts and components surpassed chemicals, making up 34.2% of all shipments.
Currently, there are around 150 Taiwanese companies doing business in India, most of them small-and-medium-sized enterprises, but as Chen says, now there are also big electronics players such as Foxconn, Wistron, and Pegatron, which manufacture iPhones.
According to Chen, Apple contract manufacturers Wistron, Pegatron, and Foxconn have poured investment into India in recent years. Foxconn is apparently injecting another US$500 million into its iPhone unit in Tamil Nadu, he said, while predicting that “The whole Apple supply chain will follow suit.”
Reportedly, a delegation led by Chairman and CEO Young Liu of Foxconn, which deals with the semiconductor sector, visited the southern Indian states of Telangana and Karnataka to identify sites for new production facilities.
It may be noted here that in February 2022, Foxconn and India’s Vedanta Ltd. signed an MoU to form a joint venture for establishing a display fabrication and semiconductor facility in India. Reportedly, the two companies have selected Gujarat to establish the plant.
Taiwanese footwear manufacturer Apache is based in Andhra Pradesh. Taiwanese textile company JINTEX and shoemaker Feng Tay are located in Tamil Nadu.
Chen emphasizes that Taiwan’s strengths include manufacturing and playing a key role in global supply chains related to “semiconductors, smart machinery components, and petrochemicals, but “now we are moving into electronics manufacturing. That’s the latest stage of development. For the time being, our companies are staying in China, but they gradually need to find backup or future manufacturing sites. They need to diversify away from China in order to increase their resilience.”
However, a report by “Institut Montaigne” points out that the expansion of Taiwanese companies in India is not free of challenges.
Foxconn’s Chennai plant has witnessed labor protests, including strikes. Wistron manufacturing plant in Narasapura in Karnataka had had riots, believed to be orchestrated by some political parties.
All this puts a question mark on the business environment in India.
It is possible that Taiwan’s decision to open the Mumbai Taipei Economic and Cultural Center is aimed at increasing its footprints in Western India, particularly in Gujarat, rather than in South India, its earlier region of preference, to avoid frequent labor unrest.
What is noteworthy here is that Taiwan expects a much better business environment from India under Prime Minister Narendra Modi. After all, it was Modi who, as the then general secretary of the Bharatiya Janata Party (BJP), had visited Taiwan in 1999.
As the Chief Minister of Gujarat, he invited the largest-ever Taiwanese business delegation to the state in 2011. In 2012, Gujarat signed an agreement with Taiwan’s China Steel Corp (CSC) to set up an electrical steel plant in Dahej.
Taiwan has also appreciated that it was under Modi as the Prime Minister that Minister of State for External Affairs Meenakshi Lekhi attended the second swearing-in ceremony of Taiwanese President Tsai Ing-Wen in 2020, along with Rahul Kaswan, another BJP parliamentarian virtually.
This gesture was particularly significant as China has always been a huge limiting factor for India in its dealings with Taiwan. China balks at anything that smacks of “official” dealings with Taiwan. It always reminds New Delhi of its “one China principle.”
But, it is again under Modi’s premiership that in 2018, India’s parliamentary Committee on External Affairs urged the government to reconsider its “deferential foreign policy towards China.”
India is “overtly cautious” about China’s sensitivities on Taiwan and Tibet, but Beijing hasn’t shown the “same deference” while dealing with New Delhi’s sovereignty concerns linked to Arunachal Pradesh or China–Pakistan Economic Corridor (CPEC), the committee said. India can’t continue with a “conventionally deferential foreign policy towards China” and must adopt a “flexible approach,” the committee chaired by Congress leader Shashi Tharoor recommended. “The Committee strongly feels that the Government should contemplate using all options, including its relations with Taiwan, as part of such an approach.”
Viewed thus, it is indeed a great time for New Delhi to deepen its political ties with Taipei, particularly when the latter is so keen and responsive.
- Author and veteran journalist Prakash Nanda is Chairman of the Editorial Board – EurAsian Times and has been commenting on politics, foreign policy, on strategic affairs for nearly three decades. A former National Fellow of the Indian Council for Historical Research and recipient of the Seoul Peace Prize Scholarship, he is also a Distinguished Fellow at the Institute of Peace and Conflict Studies.
- CONTACT: prakash.nanda (at) hotmail.com
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