India, Taiwan start negotiation for free trade agreement: Report

Close on the heels of the Rs 76,000 crore incentive announced by the country’s central government for the semiconductor industry, India and Taiwan have started negotiation on the free trade agreement (FTA) and if everything goes well both countries will together work on establishing a semiconductor hub, a report claimed.  

According to a PTI report, India is now exploring options to ink an FTA with Taiwan on the lines of Taiwan’s strategic relationship with the United States which involves laying a red carpet for setting up their manufacturing facilities.  

The report, citing anonymous sources, said that there is a strategic significance of attempting to firm up the FTA and to set up the semiconductor hub. The semiconductor plant in the US was set up in the reflection of the close strategic ties between the two sides. It will be the same in India’s case as well.  

Also read: Indian semiconductor policy: everything that’s happened so far

It further said that the central government is already offering greenfield sites to some of the leading Taiwanese players such as Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corporation (UMC) to kickstart the semiconductor project.  

If the agreement gets inked, it will catalyse the government of India’s semiconductor policy, which entails fiscal support of up to 50% of the total project cost for industry players looking to establish Semiconductors and display fabs in the country.  

The global shortage of semiconductors has severely crimped multiple sectors in the Indian economy such as automotive, electronics, smartphones, among others. With global players like Taiwan Semiconductor Manufacturing Co. (TSMC), Intel, AMD, Fujitsu, United Microelectronics Corp., etc., yet to firm up plans to build semiconductors in India, local players like Tata Group are also planning to up its ante.  

Meanwhile, an IDC report claimed that the global semiconductor market is expected to see normalisation and balance by the middle of 2022 and could bring overcapacity by 2023. The same report claimed that by 2025, the industry will reach $600 billion, with a CAGR of 5.3% through the forecast period.