Why has Foxconn withdrawn from Vedanta chip plan in India?

In February 2022, global electronics maker Foxconn and Indian conglomerate Vedanta had announced a partnership to make semi-conductors in India. In September, the companies signed a pact to invest $19.5 billion to set up a plant in Gujarat’s Dholera – which aimed to be operational in 2024. But now, Foxconn on Monday announced it is pulling out of the joint venture. The company added it is “working to remove the Foxconn name from what now is a fully-owned entity of Vedanta”. “Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future stakeholders,” Hon Hai Technology group (Foxconn) said. So, what happened? And what happens next? Let’s take a closer look: What happened? Foxconn on Monday said, “In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta." The statement said that for over a year Hon Hai Technology Group (Foxconn) and Vedanta have worked hard to bring a great semiconductor idea to reality. It has been a fruitful experience that can position both companies strongly going forward. “Foxconn is confident about the direction of India’s semiconductor development. We will continue to strongly support the government’s ‘Make In India’ ambitions and establish a diversity of local partnerships that meet the needs of stakeholders,” it said. The development comes just months after Deputy IT minister Rajeev Chandrasekhar told Reuters the JV was “struggling” to tie up with a technology partner. In June, SEBI fined 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. 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. New Delhi had also raised several questions on the cost estimates provided to request incentives from the government, the source added. Among other problems encountered by the Vedanta-Foxconn project were deadlocked talks to involve European chipmaker STMicroelectronics (STMPA.PA) as a tech partner, Reuters previously reported. While Vedanta-Foxconn managed to get STMicro on board for licensing technology, India’s government had made clear it wanted the European company to have more “skin in the game”, such as a stake in the partnership. STMicro was not keen on that and the talks remained in limbo, a source has said. ‘No impact’ Union minister Ashwini Vaishnav told News18 “both the companies are fully committed to India’s semiconductor mission and make in India”. Chandrasekhar on Twitter said Foxconn’s decision had “no impact” on India’s plans, adding that both companies were “valued investors” in the country. He said it was not for the government to “get into why or how two private companies choose to partner or choose not to”.

➡️This decision of Foxconn to withdraw from its JV wth Vedanta has no impact on India's #Semiconductor Fab goals. None.

➡️Both Foxconn n Vedanta have significant investments in India and are valued investors who are creating jobs n growth.

➡️It was well known that both… https://t.co/0DQrwXeCIr

— Rajeev Chandrasekhar 🇮🇳 (@RajeevRC_X) July 10, 2023

“While their JV VFSL had originally submitted a proposal for 28nm fab, they could not source appropriate Tech partner for that proposal," he added.  What happens next? Vedanta has said it will press on and that it is fully committed to its semiconductor project and had “lined up other partners to set up India’s first foundry”.

“Vedanta has redoubled its efforts” to fulfil Modi’s vision, it added in a statement.

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“We will continue to grow our Semiconductor team, and we have the license for production-grade technology for 40nm [chips] from a prominent Integrated Device Manufacturer (IDM),” the company said. [caption id=“attachment_12671222” align=“alignnone” width=“640”] Vedanta has said it will press ahead with its plans. Moneycontrol[/caption] “India remains pivotal in repositioning global semiconductor supply chains.” But some say this is a blow to the government. “This deal falling through is definitely a setback for the ‘Make in India’ push,” said Neil Shah, vice president of research at Counterpoint, adding that it also does not reflect well on Vedanta and “raises eyebrows and doubts for other companies”. Regardless, the Indian government has said it remains confident of attracting investors for chipmaking. Micron last month said it will invest up to $825 million in a chip testing and packaging unit, not for manufacturing. With support from India’s federal government and the state of Gujarat, the total investment will be $2.75 billion. India, which expects its semiconductor market to be worth $63 billion by 2026, last year received three applications to set up plants under a $10 billion incentive scheme. These were from the Vedanta-Foxconn joint venture, Singapore-based IGSS Ventures and global consortium ISMC, which counts Tower Semiconductor (TSEM.TA) as a tech partner. The $3 billion ISMC project has stalled, too, owing to Tower being acquired by Intel, while another $3 billion plan by IGSS was also halted because it wanted to re-submit its application. India has re-invited applications for the incentive scheme from companies.  With inputs from agencies