As US-China tensions heat up, Taiwan’s firms pivot to India

Taiwanese firms seeking to reduce their reliance on mainland China amid the fallout from the coronavirus and the US-China trade war are pivoting to India, drawn by its giant market, inexpensive skilled workforce and generous tax breaks.

The Taiwanese company Pegatron, an assembly partner for the US tech giant Apple, raised eyebrows this month with the news that it was applying for permits to set up its first plant in India. The firm, which reported revenue of US$44.8 billion in 2019, normally offshores its orders to its factories in mainland China.

While perceptions of tangled bureaucracy and high taxes have in the past put off many overseas firms from investing in India, a charm offensive by the Narendra Modi government that has included slashing corporate tax rates has added to India’s appeal just as many companies look to diversify supply chains in the wake of the coronavirus pandemic and amid increasing signs of US-China decoupling.

Companies in Taiwan, the world’s 22nd largest economy, have historically picked mainland China for offshoring production of electronics and machinery but despite the mainland’s proximity, common language and shared culture, costs are rising and the US-China trade war that broke out in 2018 raised tariffs on goods shipped out of China to the United States.

“Because of global impacts from the US-China trade war and the novel coronavirus outbreak, diffusion of risk and allocations is an irreversible trend,” the island government’s InvesTaiwan office told This Week in Asia. “Taiwan investors considering India see a huge domestic market and ample labour.”