Taiwan’s Foxconn and Indian metals-to-oil conglomerate Vedanta had joined hands in September to make Indian prime minister Narendra Modi’s lofty dreams of making India a semiconductor manufacturing hub a reality. But if and when if they do, it won’t be together: Foxconn, officially named Hon Hai Precision Industry, has withdrawn from the $19.5 billion joint venture.
Foxconn, one of the world’s largest chips maker that is most famous for producing Apple’s iPhones, did not elaborate on the reasons behind its decision in a statement yesterday (July 10) that announced the end of the partnership.
A report in the Times of India suggested the two companies struggled to get a third-party technology partner to produce chips that are used in mobile phones. Foxconn clarified today (July 11) that the breakup was not acrimonious — both sides just recognized the “project was not moving fast enough, there were challenging gaps we were not able to smoothly overcome, as well as external issues unrelated to the project,” it said in a follow-up FAQ.
Together, the duo had plans to set up semiconductor and display production plants in Gujarat, Modi’s home state where he was the chief minister from 2001 to 2014 before contesting and winning the national elections. Foxconn, whose founder Terry Guo is set once again to run for president in Taiwan, was due to be a minority stakeholder in the joint venture. Vedanta, helmed by Indian business magnate Anil Agarwal, would own 60%.
Charted: A shock to Vedanta’s stock
A brief timeline of the Foxconn-Vedanta partnership
Feb. 14, 2022: Foxconn signs a memorandum of understanding with Vedanta to “form a joint venture company that will manufacture semiconductors in India.”
Sept. 13, 2022: Vedanta and Foxconn pick Modi’s home state of Gujarat to set up a $19.5 billion semiconductor and display unit in the coastal state.
Sept. 14, 2022: Vedanta’s Anil Agarwal says he does not foresee funding problems for the joint venture. “Foxconn has taken equity. They will bring their own money,” Agarwal said. “With the reputation of ours and Foxconn, money will never be a constraint.”
May 19, 2023: Deputy IT minister Rajeev Chandrasekhar tells Reuters the joint venture is“struggling” to tie up with a technology partner.
May 31, 2023: After Vedanta-Foxconn gets on board STMicroelectronics for licensing technology, India’s government said it wants the Dutch semiconductor fabricator to have “more skin in the game,” like a stake in the partnership, Reuters reported citing anonymous sources. Talks become deadlocked. Separately, Bloomberg reports the Indian government is poised to deny crucial funding for the chip venture.
June 30, 2023: India’s markets regulator fines Vedanta Rs30 lakh ($36,405) for breaching disclosure rules. In a press release, the company said Vedanta has partnered with Foxconn, whereas it was actual holding company Volcan Investments Ltd (VIL) that forged the deal.
Quotable: Modi government shrugs off Foxconn-Vedanta breakup
“To those editorializing about this decision of Foxconn/Vedanta being a “blow” to Indias Semicon ambition, I can only say it’s a bad idea to bet against India under PM Modi. India is just getting started.” — Rajeev Chandrashekhar, union minister of state for entrepreneurship, skill development, electronics & technology, wrote on Twitter yesterday (July 10).
One big number: Foxconn and Vedanta’s joint venture
$64 billion: How big India’s semiconductor market will grow to become by 2026, nearly three times its 2019 size of $22.7 billion.
Rabbit hole: Other stalled chipmaking projects in India
The India government had approved a $10 billion (Rs 76,000 Crore) incentive to build up the semiconductor ecosystem in India back in December 2021. Three projects, including Foxconn-Vedanta, had been approved.
Another smaller $3 billion project under global consortium ISMC — which counts Israel’s Tower Semiconductor as a partner — has come to a standstill too, on account of Tower being in the process of being acquired by Intel.
A separate $3 billion project by Singapore-based IGSS venture has also been put on pause as the company reworks and re-submits its application for government incentives.
One more thing: Vedanta and Foxconn still have grand India chipmaking plans
Vedanta is “fully committed to its semiconductor fab project and we have lined up other partners to set up India’s first foundry,” it said in a statement today (July 11).
Foxconn, which first entered India in 2006, is not giving up on the region either. The company said it is already “working toward submitting an application related to the ‘Modified Programme for Semiconductors and Display Fab Ecosystem,” and it’s on the lookout for “optimal partners.”