Foxconn withdraws from $19.5 billion Vedanta chip plan in India
In a major blow to India's ambitious chipmaking plans, Taiwan's Foxconn, the world's largest contract electronics maker, has announced that it has pulled out of a $19.5 billion joint venture with Indian conglomerate Vedanta to set up semiconductor and display production plants in Gujarat. The reasons for the withdrawal are not clear, but the project had faced several challenges and delays since its inception.
A timeline of the failed joint venture
The Vedanta-Foxconn joint venture was one of the three proposals that India had received last year under a $10 billion incentive scheme to boost domestic manufacturing of electronics and semiconductors, which are in high demand globally due to a supply crunch. Here is a timeline of how the project unfolded:
- Feb. 14, 2022: Foxconn partners with Vedanta to make semiconductors in India in a bid to diversify its business. Foxconn said it will be "a significant boost to domestic manufacturing of electronics in India".
- Sept. 13, 2022: Vedanta and Foxconn sign pacts to invest $19.5 billion to set up semiconductor and display production facilities in Modi's home state of Gujarat.
- Sept. 14, 2022: Vedanta's Anil Agarwal says the Indian metals-to-oil conglomerate does not see funding problems for the JV.
- May 19, 2023: Deputy IT minister Chandrasekhar tells Reuters the JV is "struggling" to tie up with a technology partner.
- May 31, 2023: Reuters reports that Vedanta-Foxconn JV is proceeding slowly as talks to involve STMicroelectronics as a partner are deadlocked. Vedanta-Foxconn had got STMicro on board for licensing technology, but India's government had made clear it wanted the European chipmaker to have more "skin in the game", such as a stake in the partnership, a source with direct knowledge of the matter said.
- June 30, 2023: India market regulator fines Vedanta for breaching disclosure rules by publishing a press release that made it appear it had partnered with Foxconn to make semiconductors in India, as the deal was with Vedanta's holding company.
- July 10, 2023: Foxconn drops Vedanta chip JV, without specifying a reason. "Foxconn has determined it will not move forward on the joint venture with Vedanta," it said, saying it had worked for more than a year on the project but the two sides had mutually decided to end the JV and it will remove its name from what now is a fully-owned Vedanta entity.
A setback to Modi's chipmaking vision
The withdrawal of Foxconn from the joint venture is a setback to Prime Minister Narendra Modi's vision of making India a global hub for electronics and semiconductor manufacturing, which he has made a top priority for his economic strategy. India, which expects its semiconductor market to be worth $63 billion by 2026, imports most of its chips from abroad and faces a huge trade deficit in electronics.
Modi had hoped to lure foreign investors to make chips locally for the first time and reduce India's dependence on imports. However, his plan has faced several hurdles, such as lack of infrastructure, skilled manpower, technology transfer and policy support.
The other two proposals that India had received under the incentive scheme have also stalled. The $3 billion ISMC project has been put on hold due to Tower Semiconductor being acquired by Intel, while another $3 billion plan by IGSS Ventures has been halted as the firm wanted to re-submit its application.
India's chipmaking ambitions have also been hampered by geopolitical tensions with China, which is a major supplier of raw materials and equipment for the industry. India has banned several Chinese apps and restricted foreign direct investment from China amid border disputes.
What next for Vedanta and Foxconn?
Vedanta, which has interests in metals, mining, oil and gas, said it remains committed to its semiconductor project and will continue to work with the government and other stakeholders to make it a success. It said it will explore other opportunities to collaborate with Foxconn in the future.
Foxconn, which is best known for assembling iPhones and other Apple products, said it will continue to invest in India and support its customers and partners there. It said it has been expanding into chips to diversify its business and will pursue other opportunities in the sector.
Sources:
(1) Foxconn dumps $19.5 bln Vedanta chip plan in blow to India. https://www.reuters.com/technology/foxconn-pulls-out-india-chip-jv-with-vedanta-2023-07-10/.
(2) Foxconn withdraws from $19.5 billion Vedanta chip plan in India. https://www.reuters.com/article/hon-hai-vedanta-chips-idUSL4N38W2O2.
(3) Foxconn dumps $19.5 bln Vedanta chip plan in blow to India. https://energy.economictimes.indiatimes.com/news/power/foxconn-dumps-19-5-bln-vedanta-chip-plan-in-blow-to-india/101641878.
(4) Foxconn dumps $19.5bn Vedanta chip plan in blow to India. https://article.wn.com/view/2023/07/10/Foxconn_dumps_195bn_Vedanta_chip_plan_in_blow_to_India/.
(5) Foxconn dumps $19.5 bln Vedanta chip plan in blow to India. https://flipboard.com/topic/narendramodi/foxconn-dumps-19-5-bln-vedanta-chip-plan-in-blow-to-india/a-ataxd_aXS5yO9Pd3UqjlBQ%3Aa%3A106586776-82230d74e0%2Freuters.com.
Why did Foxconn pull out of Vedanta?
Sources told ET that there were major cultural differences in the approach of the two companies. “They (Foxconn) are a very high-tech company focused on the Asia region and Vedanta is a resources company which is not necessarily focussed on such high-tech projects.
Why did Foxconn leave India?
Foxconn pulled out of a semiconductor joint venture with Vedanta after India's government raised questions over its application for an incentive scheme for chip production, a source familiar with the matter said.
What is the deal between Foxconn and Vedanta?
In September of the previous year, Vedanta and Foxconn, also known as Hon Hai Precision Industry Co Ltd, made headlines with their announcement of a $19.5 billion investment in the establishment of semiconductor and display production plants in the state of Gujarat.
How much Vedanta and Foxconn are planning to build a chip plant worth?
The Vedanta-Foxconn JV is eyeing a $20 billion chip plant in Gujarat. NEW DELHI : Only one of the three semiconductor manufacturing proposals submitted to secure financial support under India's $10 billion incentive scheme is likely to make the cut, a top official familiar with the development said.
