India’s Nuanced, Trade-Focused Taiwan Policy Key To Bolstering ‘Non-Red’ Supply Chain. Experts Explain

Taiwan has a vital position in the ‘non-red’ supply chain — a context that is expected to underlie many bilateral and multilateral dealings in the Indo-Pacific over the next five years.

Representational image.

Source : Pixabay

Taiwan, a geopolitical hotspot in the Indo-Pacific, has made headlines in recent weeks due to semiconductor giant Taiwan Semiconductor Manufacturing Company’s (TSMC’s) pledge to invest $100 billion in the United States.

The commitment energised United States-Taiwan relations. It also brought into focus Taiwan’s vital position in the ‘non-red’ supply chain — a context that will underlie many bilateral and multilateral dealings in the Indo-Pacific over the next five years, experts say.

The strength of the non-red supply chain will also rest in large measure on Taiwan’s relationship with Quad — the quadrilateral alliance comprising the United States, India, Australia, and Japan.

Trade And Commerce

According to experts, ties between India and Taiwan are nuanced, but largely focused on trade and commerce. Taiwan can play a vital role in developing India’s semiconductor ecosystem, and experts say New Delhi should make it easier for TSMC and other Taiwanese semiconductor companies to set up shop in the world’s fastest growing economy.

“India’s Taiwan policy is primarily trade and commerce,” said Vice-Admiral Shekhar Sinha (Retd), India’s former Chief of Integrated Defence Staff who currently chairs the Board of Trustees of the New Delhi-based India Foundation.

India is seeking foreign investments for its semiconductor industry, and the Taiwanese government and companies have been at the forefront of this.

Importance Of Quad

China’s unfriendly presence could be seen as a challenge to the India-Taiwan relationship. However, the strong presence of Quad countries in the Indo-Pacific implies that “India’s trade and commerce policy is not going to change” in the face of Chinese aggression, Sinha said.

If China tries to take over Taiwan by force, Sinha added, the United States will be provoked to act because it’s bound by the Taiwan Relations Act.

Meanwhile, the Malabar naval exercises — which began in 1992 as a bilateral drill involving the US and Indian navies — have expanded in recent years to include all four Quad nations. 

That makes the Quad a “go-ahead partnership” ready to respond to Chinese aggression, providing assurance for India’s trade and commerce relationship with Taiwan, Sinha said.

The annual maritime military exercises are aimed at “enhancing interoperability, fostering mutual understanding, and addressing shared maritime challenges in the Indian Ocean and Indo-Pacific region”, the Indian Ministry of Defense said in a statement announcing the 2024 event.

Sinha added, “Let’s recall the Japanese policy which states that any military action on Taiwan will be as good as military action on any Japanese island and will provoke [a] reaction.”

Taiwan’s Tech Industry Eyes India

According to Ming-Shih Shen, national security research director at Taipei’s Institute for National Defense and Security Research, more and more large tech companies in Taiwan want to invest in India — not merely in order to decouple from China but spurred by a blossoming cultural exchange between the two countries.

India’s participation at the just-concluded 2025 Taiwan International Machine Tool Show was notable. It was the biggest buyer among the 90 participating countries at the March 3-8 event, followed by Japan, China, South Korea and Malaysia, according to the Taiwan External Trade Development Council (TAITRA).

TAITRA attributed this to burgeoning demand for Taiwanese smart technology manufacturing as well as its artificial intelligence (AI).

Air Marshal Anil Khosla (Retd), former vice-chief of the air staff of the Indian Air Force (IAF), noted that MediaTek (MTK), a Taiwanese semiconductor company, already has research and development operations in India, while more Taiwanese companies are eyeing design and software collaborations. MTK is a fabless company, meaning that it designs and markets semiconductors but outsources their manufacturing.

“Semiconductor cooperation offers mutual benefits in economic growth, technological advancement, and strategic realignment,” Khosla, who led some of India’s most important air operations, including the Balakot air strikes, and was heavily involved in the Doklam stalemate between India and China in 2017, said.

‘Non-Red’ Supply Chains

Taiwan Foreign Affairs Minister Lin Chia-lung said on March 8 that Taiwan plays a key role in non-red supply chains because of its cutting-edge semiconductor technology, and also because of the trust it enjoys among democratic countries.

Experts said this aspect is significant for India as it, too, is an important player in non-red supply chains.

On March 3, TSMC head C.C. Wei, standing next to President Donald Trump at the White House, announced a $100 billion investment in America. That made TSMC the biggest foreign direct investor on US soil in history.

When asked about India’s participation in non-red supply chains and what India can learn from TSMC’s recent US investment, S.D. Pradhan — former chairman of India’s Joint Intelligence Committee and a former Indian deputy national security adviser — said the investment is relevant for India because of New Delhi’s effort to create a “trilateral understanding” with both Taiwan and the United States in the semiconductor field.

Pradhan highlighted that, during Prime Minister Narendra Modi's visit to Washington in February, Modi and Trump discussed collaboration with Taiwan on semiconductors and AI. However, “they have yet to formally take [it] up with Taiwan”, he said.

Smoothing The Way For Investment

Sinha said India has lessons to learn from the US-TSMC deal about the “ease of doing business”.

TSMC “has been knocking [on] doors” in India for Special Economic Zone (SEZ) approval, but has not succeeded, because the corporation is partnered with small and medium enterprises (SMEs) that don’t meet certain Indian criteria.

The company has a unique relationship with multiple local SMEs — it supports about 1,600 Taiwanese suppliers on which it relies for various resources and services. These backbone enterprises form Taiwan’s local semiconductor supply chain.

Sinha advised that India should “give leeway” to TSMC when it comes to setting up a plant in India, given the semiconductor industry’s strategic importance.

“But bureaucracy has shown its true side” when it comes to blocking TSMC’s foreign direct investment in India, he said.

Sinha noted that FOXCONN also pulled out of India in 2023, after having entered into a partnership with an Indian conglomerate, blaming that pull-out on bureaucracy as well.

Taiwan and the US have bilateral agreements governing their trade and technological cooperation, and India and Taiwan also need a bilateral agreement matching their unique context and needs, to encourage cooperation in semiconductor manufacturing, Pradhan said. “However, we need a trusted supply chain for export. For this, a trilateral agreement is needed,” said Pradhan.

During Modi’s recent visit to Washington, India and the United States launched a new initiative entitled ‘Transforming the Relationship Utilizing Strategic Technology (TRUST)’. The initiative involves close cooperation between public, private sectors and academicians on AI and semiconductors. Pradhan said he expects this bilateral initiative to lead to a trilateral agreement.

The Future Of Indian AI

Air Marshal Anil Khosla (Retd) stressed the importance of Taiwan for the future of Indian AI. At present, India relies on Taiwan for high-end graphic possessing units (GPUs) and AI chips, which are essential for AI supercomputing and cloud AI services.

India can benefit from a collaboration with top Taiwanese research  institutions such as Academia Sinica and the Industrial Technology Research Institute, which specialise in AI-chip co-development, he said.

India’s AI growth is closely linked to its semiconductor partnerships with Taiwan, which is home to TSMC, MediaTek, and other key players in the industry, he added. MediaTek supplies AI-driven smartphone processors, “the key to India’s mobile AI market”, Khosla said.

Meanwhile, India’s software producing capabilities can be helpful to Taiwan.

NITI Ayog, the Indian government’s apex public policy think tank, has submitted a report on the semiconductor ecosystem of India along with the Indian Institute of Technology Delhi, , Sinha said, adding that he expects this to lead to reforms in semiconductor FDI in India.

Defence Collaboration

In 2018, as Taiwan’s Indigenous Defense Submarine programme picked up steam, India was invited to collaborate, Shen said. It wasn’t made public if India provided assistance to Taiwan on the submarine project, which is expected to go for sea trials this year.

“But it is a fact that many countries secretly assist Taiwan in manufacturing submarines,” said Shen. “It is currently actively preparing for the construction of… seven subsequent submarines. If India can assist Taiwan, it will be helpful to both countries and may even lead to further defence industry cooperation.”

Pradhan clarified that, in 2018, an Indian defence company was invited to participate in the submarine project, but eventually an American company was selected. However, Taiwan recruited several Indian engineers for the project, he said.

India-Taiwan Relations Post-Galwan

The 2020 Galwan conflict was a catalyst for India and Taiwan's strategic relations.

After the brutal sticks-and-stones battle between Indian and Chinese troops, China’s expansionist tendencies along the disputed border with India suddenly started finding geopolitical connection to its activities in the Taiwan Strait.

Experts have said, in today’s context, the growing footprint of China in the Indo-Pacific challenges both India and Taiwan and makes a strategic relationship between them of greater potential.

“The two countries have also made great progress in security and think tank cooperation, especially in the exchanges on national security affairs, which are more in-depth than in the previous decade,” Shen said. “These changes are of course related to the Doklam incident (two-month military standoff between India and China in 2017 at the trilateral border junction with Bhutan) and the Galwan Valley conflict in 2020.”

In what may be a first, Taiwan’s deputy national security adviser, Hsu Szu-chien, spoke at the 2025 Raisina Dialogue, a premier conference on geopolitics and geo-economics, in March. Organised by the Observer Research Foundation in partnership with India’s foreign ministry, the event took place in New Delhi.

Hsu reportedly also travelled to the United States with a Taiwanese team in recent months to meet with the new Trump administration.

Strategic Cooperation Against China

Satoru Nagao, a non-resident fellow at the Washington-based Hudson Institute, said that, during their recent meeting, Trump and Modi agreed to promote strategic cooperation against China. This will have a direct impact on Taiwan, although it is not directly related to its strategic concerns.

US-India cooperation in defence areas, especially the Sino-Indian border, will mean that “China cannot concentrate on Taiwan”, he said.

Citing China’s strategic aggressiveness on the disputed border, as well as in the Taiwan strait, Shen said Beijing isn’t going to give up its agenda any time soon, and will actively pursue a resolution in its favour.

“The current pause or negotiation [between India and China] does not mean [Beijing is] giving up the territorial sovereignty issue,” said Shen. “Taiwan can play a leverage role in India’s interaction with China” by providing a trade alternative to China, he said. Taiwan can also provide important context for India’s understanding of China.

In sum, cooperation with Taiwan will help India maintain its geopolitical, technological, and “value” interests, he said. 

Track 1.5 Diplomacy 

It’s time for India to up its diplomacy game with Taiwan to “track 1.5”, Vice-Admiral Shekhar Sinha (Retd) said.

A step below traditional diplomacy between two governments, track 1.5 diplomacy is a form of backchannel diplomacy involving a mix of government officials — in an unofficial capacity — and non-government officials.

The India Foundation already has bilateral agreements with Taiwanese think tanks. Sinha recommended adding a lower-level representative from the Ministry of External Affairs to think tank discussions between the two countries.

Venus Upadhayaya is a Ministry of Foreign Affairs Taiwan 2025 fellow. 

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