Foxconn Abandons $19.5 Billion Vedanta Chip Plan, Blows India

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TAIPEI/BENGALURU: Taiwan’s Foxconn announced on Monday that it had pulled out of its $19.5 billion semiconductor joint venture with Indian metal-oil conglomerate Vedanta in the wake of Prime Minister Narendra Modi’s plan to manufacture semiconductors for India.

Last year, the world’s largest contract electronics maker signed an agreement with Vedanta to set up a semiconductor and display manufacturing plant in Modi’s home state of Gujarat.

“Foxconn has decided not to proceed with the joint venture with Vedanta,” Foxconn said in a statement, without elaborating on why.

The company has been working with Vedanta for over a year to bring their “brilliant semiconductor idea” to life, but has mutually decided to dissolve the joint venture, removing its name from the company now wholly owned by Vedanta. announced. .

Vedanta said it is fully committed to the semiconductor project and is “collaborating with other partners to set up India’s first foundry.” “Vedanta has doubled down on his efforts” to realize Modi’s vision, the statement added.

Fears of delays in the approval of incentives by the Indian government played a role in Foxconn’s decision to pull out of the business, according to people familiar with the matter. The city of New Delhi also raised some questions about the cost estimates presented to the government to seek incentives, the people said.

PM Modi has made semiconductor manufacturing a top priority in India’s economic strategy to pursue a “new era” of electronics manufacturing, and Foxconn’s move will attract foreign investors to make chips domestically for the first time, Modi said. a blow to the ambitions of

Neil Shah, vice president of research at Counterpoint, said: “The breakdown of this deal is definitely a setback for the ‘Make in India’ push,” adding that the deal does not reflect Vedanta well. , added that it “makes other companies frown and question.” .

Deputy IT Minister Rajeev Chandrasekhar said Foxconn’s decision had “no impact” on India’s plans, adding that both companies were “valuable investors” in India.

He said the government cannot “get into why or how two private companies choose to partner or not”.

“Important step”

Foxconn is best known for assembling iPhones and other Apple products, but has expanded into chips in recent years to diversify its business.

Most of the world’s chip production is limited to a few countries such as Taiwan, and India is a latecomer. The Vedanta-Foxconn venture announced plans to manufacture chips in Gujarat last September, with Prime Minister Modi calling the project a “significant step” to boost India’s chip manufacturing ambitions.

However, his plan did not quite take off. Reuters previously reported that among other problems the Vedanta-Foxconn project has encountered is stalled negotiations to bring European chipmaker STMicroelectronics on board as a technology partner.

Vedanta-Foxconn has successfully brought in STMicro in technology licensing, but the Indian government has made it clear that it wants more “involvement” from European companies, such as investing in partnerships.

According to people familiar with the matter, STMicro was reluctant to do so, and talks remained at a dead end.

The Indian government said it remained confident in attracting investors in semiconductor manufacturing. Micron announced last month that it would invest up to $825 million in chip testing and packaging rather than manufacturing. With support from the Indian federal government and Gujarat state, the total investment will be USD 2.75 billion.

India, which expects its semiconductor market to be worth $63 billion by 2026, received three applications last year to build factories under the $10 billion incentive scheme.

These are from a joint venture between Vedanta and Foxconn, Singapore-based IGSS Ventures, and the global consortium ISMC, which counts Tower Semiconductor as technology partners.

A $3 billion ISMC project has also stalled due to the acquisition of Tower by Intel, while another $3 billion plan by IGSS was also canceled after it wanted to resubmit the application.

India has re-invited applications for incentive schemes from companies.

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