Taiwan's Strategic Expansion into India's Tech Ecosystem Amid U.S. Demand Shifts

The global semiconductor industry is undergoing a seismic shift, driven by U.S. policy reorientations and the urgent need for supply chain resilience. At the heart of this transformation lies a strategic partnership between Taiwan and India, two nations recalibrating their technological ambitions amid geopolitical headwinds. As the United States imposes steep tariffs on imported chips and reshapes its industrial strategy, Taiwanese firms are accelerating investments in India's nascent semiconductor ecosystem. This move is not merely economic but deeply geopolitical, reflecting a recalibration of global manufacturing networks to mitigate risks from China and align with U.S. strategic priorities.

U.S. Policy Shifts and the Reshaping of Global Supply Chains

The Trump administration's 2024–2025 semiconductor policy has introduced a dual-edged sword for global manufacturers. On one hand, tariffs of up to 100% on imported chips and semiconductor products have raised costs for companies reliant on cross-border productionU.S. Imposes 20% Tariff on Taiwan Exports : Section 232^[5]. On the other, the rescission of Biden-era export restrictions on AI chips has opened new markets for firms like Nvidia and AMDBeyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1]. For Taiwan, a critical node in the global semiconductor supply chain, these shifts have created both challenges and opportunities.

TSMC, the world's largest foundry, has responded by committing $100 billion to expand its U.S. footprint, including three new fabrication plants in ArizonaU.S. Imposes 20% Tariff on Taiwan Exports : Section 232^[5]. However, such moves are costly and time-intensive, prompting Taiwanese firms to seek alternative markets less exposed to U.S. tariff pressures. India, with its Production-Linked Incentive (PLI) schemes and $10 billion Semiconductor Mission, has emerged as an attractive destinationMajor Semiconductor Investments in India | EduCare^[6].

Taiwan's Strategic Pivot to India

Taiwan's investments in India are not accidental but part of a calculated strategy to diversify its manufacturing base and align with U.S. geopolitical goals. The collaboration between Tata Electronics and Powerchip Semiconductor Manufacturing Corporation (PSMC) to build India's first 12-inch wafer fab in Gujarat—a $11 billion project—exemplifies this alignmentBeyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1]. This venture, supported by India's PLI framework, is expected to produce power management ICs, display drivers, and high-performance computing components, creating 20,000 jobsBeyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1].

Foxconn's partnership with HCL Technologies to establish a semiconductor assembly and testing unit in Uttar Pradesh further underscores this trendBeyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1]. These projects are part of a broader framework involving over 200 Taiwanese companies operating in India's electronics and IT sectors, with investments projected to reach $15 billionIndia-Taiwan Economic Ties: Synergies, Challenges, and Strategies^[3]. The India-Taiwan relationship is also expanding into AI and electric vehicles, leveraging Taiwan's manufacturing prowess and India's software expertiseIndia’s partnership with Taiwan - Taipei Times^[4].

The strategic calculus is clear: by investing in India, Taiwanese firms are not only hedging against U.S. tariffs but also positioning themselves within a U.S.-backed “friendshoring” network aimed at reducing reliance on China. India's semiconductor market, projected to grow at a 26.3% CAGR to $271.9 billion by 2032Beyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1], offers a compelling long-term opportunity.

Geopolitical Diversification and the Role of Informal Diplomacy

India's foreign policy under Prime Minister Narendra Modi 3.0 has embraced a pragmatic approach to its relationship with Taiwan, balancing economic opportunities with its “One-China Policy.” Informal diplomatic channels, such as the Taipei Economic and Cultural Center (TECC) and the India-Taipei Association (ITA), facilitate trade and cultural exchangesIndia’s partnership with Taiwan - Taipei Times^[4]. These institutions have deepened collaboration in cybersecurity, standard-setting, and even joint initiatives under the U.S.-led Global Cooperation and Training Framework (GCTF)U.S. Imposes 20% Tariff on Taiwan Exports : Section 232^[5].

The strategic alignment between India and Taiwan is further reinforced by shared concerns over Chinese influence. India's ambition to become a global semiconductor hub and its renewable energy targets align with Taiwan's technological expertiseIndia’s partnership with Taiwan - Taipei Times^[4]. Meanwhile, U.S. export controls on China have pushed both nations to collaborate on supply chain resilience, ensuring that critical technologies remain outside Chinese reachIndia-Taiwan Economic Ties: Synergies, Challenges, and Strategies^[3].

Challenges and the Path Forward

Despite the momentum, challenges persist. India's infrastructure and regulatory environment remain fragmented, deterring some Taiwanese firms from large-scale investmentsMajor Semiconductor Investments in India | EduCare^[6]. Labor laws, import/export restrictions, and energy constraints must be addressed to sustain growthMajor Semiconductor Investments in India | EduCare^[6]. Additionally, the U.S. tariffs, while incentivizing domestic production, risk creating short-term volatility in global marketsShort-Circuited: How Semiconductor Tariffs Would Harm the U.S. Economy^[2].

However, the long-term outlook is promising. India's PLI schemes and the Semicon India Program are creating a fertile ground for innovation, while Taiwan's ecosystem of SMEs offers the agility needed to scale rapidlyBeyond the Strait: Taiwan-India Chip Cooperation and Taiwan’s role in India’s semiconductor rise^[1]. The collaboration between these two nations is not just about chips—it is about redefining the architecture of global technology governance in an era of fragmentation.

Conclusion

Taiwan's expansion into India's tech ecosystem is a masterstroke of geopolitical pragmatism. By aligning with U.S. industrial policies and India's manufacturing ambitions, Taiwanese firms are securing a foothold in a market poised for explosive growth. This partnership, driven by shared strategic interests and the need to diversify away from China, is reshaping the global semiconductor landscape. For investors, the India-Taiwan axis represents a compelling opportunity at the intersection of technology, economics, and geopolitics.