Taiwan's Foxconn signals its faith in Indian growth with its US$5b investment

Taiwan's technology sector is, it seems, finally dancing to the tune of India's growth story. Foxconn's recent announcement that it will invest US$5 billion in the state of Maharashtra over the next five years - creating tens of thousands of jobs - is just one indication.

With more than half of its population under 25, India provides a vast pool of skilled manpower, and a vast market for cellphones and laptops.

This foray comes as mainland China, Taiwan's erstwhile favourite destination, is bracing itself for a downturn. The Taiwanese technology industry is ruthlessly competitive, product life cycles are short, innovation is critical for survival and profit margins are thin. All this leaves little room for complacency.

What we are seeing now - especially given the turmoil in the Chinese markets and slumping exports and industrial production - is most likely just the tip of the iceberg, as the Chinese economy shows increasing signs of weakness.

This is a source of major worry for Taiwanese investors, and for the economy in general because of its close ties with the mainland. Taiwanese investors have enjoyed great success there in the past, not least IT manufacturers. But Chinese labour costs are no longer competitive, and there is actually a shortage of workers.

Previous Taiwanese leaders - especially the ardently anti-Beijing ones such as Lee Teng-hui - grew frustrated over the exuberant Taiwanese businessmen putting "all their eggs in one basket". In response, policymakers came up with strange industrial zones in places like Subic Bay in the Philippines - which didn't go very far, because everyone was busy jumping on the China bandwagon.