The Government of India may have taken another big step in enhancing the country’s footprint in the semiconductor industry. According to a report by Bloomberg, officials from India and Taiwan have met “in recent weeks” to bring a chip plant worth approximately $7.5 billion to India, which will supply chips for everything from 5G devices to electric cars. The report quoted anonymous sources who were familiar with the matter and said that the move may “spark fresh tensions with China”. The Indian government has made its intentions to ramp up the country’s semiconductor quite clear over the past few months.
According to the Bloomberg report, officials in China have also been interested in making “quick progress” on a bilateral investment agreement that will reduce tariffs for “dozens of products” that are used in the manufacturing of semiconductors. This, apparently, is a “precursor to a broader trade deal”, which is also being considered. On the other hand, the report said that India is “studying” possible locations for semiconductor manufacturing in the country and had said that the country will provide up to 50% of capital expenditure from 2023, along with other incentives and tax breaks.
Further, Taiwan has reportedly “sought a trade deal” with India for a long time but Indian officials didn’t want to anger China. The Bloomberg report came on September 24, when Prime Minister Narendra Modi was visiting the United States and meeting dignitaries there. The PM also met Qualcomm’s CEO Cristiano Amon during his visit and discussed the country’s recent production linked incentives (PLI) for electronics system design and manufacturing (ESDM).
Taiwan is essentially the largest manufacturer of chips in the world and India isn’t the only country that has been looking to improve its presence in the industry. The United States has also been wanting to gain more control over semiconductor manufacturing, and companies like Samsung and Intel have already announced investments in the country for manufacturing chips.
The discussions with China could also be looked at as an escalation of tensions between India and China in recent times. PM Modi’s government banned over 200 Chinese apps in the country last year, close on the heels of border clashes with China in Ladakh.