In a major setback to Indian Prime Minister Narendra Modi’s ambitions of developing a robust chipmaking industry in the country, Taiwan’s Foxconn announced on Monday that it has pulled out of a $19.5 billion semiconductor joint venture with Vedanta, an Indian metals-to-oil conglomerate. The joint venture, which was signed last year, aimed to establish semiconductor and display production plants in Gujarat, Modi’s home state.
Why did Foxconn Withdraw?
The announcement came as a surprise, as Foxconn provided no specific reasons for its decision to withdraw. The company merely stated that it had collaborated with Vedanta for over a year to transform a promising semiconductor concept into reality, but the two parties had mutually agreed to terminate the joint venture. As a result, Foxconn will remove its name from the entity, which will now be fully owned by Vedanta.
Vedanta, on the other hand, expressed its unwavering commitment to the semiconductor project and reassured that it had already lined up alternative partners to establish India’s first foundry. In a statement, Vedanta emphasized that it has intensified its efforts to fulfill Modi’s vision.
According to a source familiar with the matter, concerns about delays in receiving incentives from the Indian government played a role in Foxconn’s decision to withdraw from the venture. The government had also raised questions regarding the cost estimates provided by the companies to request incentives. These factors likely contributed to Foxconn’s move, undermining Modi’s efforts to attract foreign investors for local chip production.
Impact of the withdrawal
Neil Shah, Vice President of research at Counterpoint, acknowledged the setback, stating that the collapsed deal was undoubtedly a blow to Modi’s “Make in India” campaign. Shah further highlighted that the development raised doubts about Vedanta and could potentially impact the trust of other companies as well.
However, Deputy IT Minister Rajeev Chandrasekhar downplayed the situation, asserting that Foxconn’s decision would not affect India’s chipmaking plans. He reaffirmed that both Foxconn and Vedanta were esteemed investors in the country. Chandrasekhar also emphasized that the government should not interfere in the private partnership decisions of companies.
Foxconn, renowned for its assembly work on Apple products, has been expanding its business to include chip manufacturing in recent years. Although chip production is dominated by a few countries, such as Taiwan, India had sought to become a significant player in the field. The Vedanta-Foxconn joint venture, announced last September, aimed to bolster India’s chipmaking ambitions. However, the project encountered various challenges, including stalled negotiations with European chipmaker STMicroelectronics to join as a tech partner.
Determined Indian Government
Despite the setback, the Indian government remains confident in attracting investors for chipmaking. Recently, Micron announced a $825 million investment in a chip testing and packaging unit in India, supported by the federal government and the state of Gujarat, with a total investment of $2.75 billion.
India, anticipating a $63 billion semiconductor market by 2026, received three applications for chip production plants under a $10 billion incentive scheme last year. Alongside the Vedanta-Foxconn joint venture, Singapore-based IGSS Ventures and global consortium ISMC, featuring Tower Semiconductor as a tech partner, had submitted applications. However, the ISMC project has also stalled due to Intel’s acquisition of Tower Semiconductor, while IGSS decided to re-submit its application, leading to a temporary halt.
In response, India has reopened applications for the incentive scheme to attract interested companies. Despite the recent obstacles encountered, the government remains determined to foster a thriving chipmaking industry in the country.