Is anchoring an FTA with India the best option for Taiwan’s semiconductor industry? | India is blooming

Lacking workers and manufacturing partners, Taiwan’s semiconductor industry has encountered a new dilemma. Could India, as a manufacturing partner, be the best choice for Taiwanese companies? Arpita Dutta written for CommonWealth magazine

Amid the labor shortage in Taiwan and the search for a manufacturing partner to relocate Taiwanese companies based in China, India could be one of the preferred destinations due to its abundant pool of talents and the enormous size of its market. To some extent, it is fair to say that choosing India as a manufacturing partner might be the best choice for Taiwanese companies.

We have noticed that India and Taiwan have been accelerating their engagement since the turn of the 21st century. Taiwan’s New Southbound Policy and India’s Act East initiative function as guiding stars to encourage and deepen engagement between India and Taiwan. It is obvious that any synergistic collaboration must be framed by a binding consensus. And both have signed bilateral investment agreements, in 2002 and 2018.

In order to stimulate and promote more productive collaborations, it is necessary to specify mutual commitments in more concrete terms. Therefore, signing an FTA (Free Trade Agreement) is expected to be a laudable step to remove all avoidable barriers to trade and investment and would lead to a paradigm shift in the regime. tariff.

With a high need for steady supply of chips, India is encouraging more Taiwanese semiconductor companies to choose India as a manufacturing partner. We have noticed that India’s proactive inward investment strategy has given great attention to Taiwan.

India is committed to creating a manufacturing hub by encouraging more inward investment, and the Production Linked Incentive Program (PLI) is a lucrative offer to make this idea a reality. Through this scheme, the Indian government provides incentives tied to manufacturing performance. All eligible manufacturing companies can claim these incentives based on the value of their incremental sales during the reference year. The government has identified 14 sectors, such as automotive, electronics, aviation, textiles, etc. for these performance awards.

Recently, the government has offered Rs 76,000 crore (INR 760 billion) as a PLI for semiconductor design, fabrication and display fabrication (fab) units. In testimony to this, to meet the demand for performance, Foxconn and Wistron, two large Taiwanese companies, have been chosen for the PLI program in 2021, and it is expected that many more Taiwanese companies will have this eligibility to benefit from the PLI advantages. . With a growing number of such investment and trade collaborations, India and Taiwan plan to secure this ecosystem by signing an FTA.

It is evident that the FTA will ensure a certain degree of liberalization of trade and manufacturing operations by eliminating tariffs, trade barriers, quotas and subsidies from both jurisdictions. The main objective of the FTA is to create more value-added platforms for long-term investment opportunities by ensuring international standards.

However, both parties should realize that the FTA will only stipulate minimum levels of protection in certain sensitive areas such as intellectual property, data protection, etc. Therefore, both sides need to investigate their national inequalities and establish a basic safeguard framework for businesses. For example, it is well known that intellectual property acts as a shield for a company during technology transfer and regional marketing.

However, this IP could be a double-edged sword due to the national inequalities of India and Taiwan. For example, on the one hand, India and Taiwan’s annual patent applications and their cross-country IP applications are not sufficiently taken into account to meet the demand for technology transfer. On the other hand, as more cross-border intellectual property applications are encouraged, companies might find a hidden trap in patent laws.

India’s compulsory licenses and Taiwan’s patent linkage system are highly contested intellectual property mechanisms. Taiwan’s intellectual property law prevents the marketing authorization of generic drugs until patents expire. However, Indian patent law allows a third party to produce a patented product during the life of a patent through a compulsory license. Therefore, companies may need the vigilance of both governments during the drafting of the FTA.

To ensure the most achievable outcome of this FTA, a thorough discussion with the company’s general counsel and legal and intellectual property attorneys from both jurisdictions should be crucial before the whole process is launched.

Source: Commonwealth Magazine

(The opinion expressed in the article is that of CommonWealth Magazine)

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