Foxconn pulls out of Rs 1.5 lakh crore Vedanta deal

Ahmedabad: In a setback to Prime Minister Narendra Modi's ambitious chip-making plans for India, Taiwan's Foxconn, the world's largest contract electronics maker, has withdrawn from a $19.5 billion semiconductor joint venture with India's Vedanta conglomerate.

The partnership between Foxconn and Vedanta, which was signed last year, aimed to establish semiconductor and display production plants in Gujarat.

In a statement, Foxconn announced its decision to not proceed with the joint venture with Vedanta, without providing specific reasons for the withdrawal. The company acknowledged its collaboration with Vedanta for over a year to transform a promising semiconductor idea into reality but stated that both parties mutually agreed to terminate the joint venture. Consequently, Foxconn will no longer be associated with the entity, which is now fully owned by Vedanta.

Vedanta and the Ministry of Electronics and Information Technology have not yet responded to requests for comments regarding Foxconn's withdrawal.

PM Modi has prioritised chip manufacturing as a key element of India's economic strategy, aiming to establish the country as a significant player in the global electronics manufacturing sector. However, Foxconn's exit from the joint venture represents a setback to these ambitions, particularly in attracting foreign investment for local chip production.

Neil Shah, Vice President of Research at Counterpoint, commented on the development, saying that the collapsed deal poses a setback for the "Make in India" initiative and raises concerns and doubts for other companies, reflecting poorly on Vedanta as well.

While Foxconn is renowned for its assembly of iPhones and other Apple products, the company has been diversifying its business by expanding into chip manufacturing. Most of the world's chip output is concentrated in a few countries, with India being a relatively late entrant.

The Vedanta-Foxconn joint venture's chip-making plans in Gujarat were announced in September 2022, with PM Modi recognising the project as a significant step toward realising India's chip manufacturing ambitions. However, progress had been slow, and the partnership faced challenges in negotiations with European chipmaker STMicroelectronics, which was expected to be a technology partner.

Issues related to STMicro's involvement, including discussions around its stake in the partnership, led to a deadlock. Despite securing STMicro's technology licensing, the European company was hesitant to increase its investment, leading to the talks being stalled.

The Indian government remains optimistic about attracting investors for chip manufacturing, with Micron recently announcing a $825 million investment in a chip testing and packaging unit, although not for manufacturing purposes. Supported by the central government and the state of Gujarat, the total investment in this project will reach $2.75 billion.

India's semiconductor market is expected to reach a value of $63 billion by 2026, and the country received three applications last year under a $10 billion incentive scheme to establish chip manufacturing plants. Apart from the Vedanta-Foxconn joint venture, Singapore-based IGSS Ventures and global consortium ISMC, with Tower Semiconductor as a technology partner, submitted applications. However, the $3 billion ISMC project faced delays due to Tower's acquisition by Intel, while IGSS halted its $3 billion plan to resubmit its application.