New Delhi: Foxconn’s decision to pull out of its $19.5 billion joint venture with Vedanta for the establishment of a semiconductor fabrication plant in Gujarat is being seen as a setback to the Narendra Modi government’s semiconductor push, though ministers put on a brave face – insisting that those ‘editorialising’ the collapse of the JV as a “blow” to official plans were making a bad bet.
On Monday, the Taiwan-based Hon Hai Technology Group, which owns Foxconn, issued a statement announcing its decision. “In order to explore more diverse development opportunities, according to a mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta,” the company said
The proposed plant was to make 28-nanometre semiconductors in Dholera, Gujarat, with official support, including subsidies for land, capital, water and electricity.
During his visit to the US recently, Prime Minister Narendra Modi had said that India is set to become the hub for semiconductors. India inked agreements with Micron, Applied Materials and Lam Research, which the Union minister of state for electronics and information technology, Rajeev Chandrasekhar, had described as a “significant and meaningful milestone” in the expansion of the semiconductor ecosystem in the country.
Last month, the government had announced that a $2.7 billion semiconductor assembly, packaging and testing plant would be built in India by the US-headquartered firm Micron. Applications from other semiconductor proposals under the production-linked incentive scheme remain under review.
When the head of Foxconn visited India last June, he was given a meeting with Modi and the PM said he welcomed the company’s plans for manufacturing semiconductors in India.
He followed this up with another tweet in September 2022, when Foxconn and Vedanta signed an MoU with the Gujarat government, claiming that the proposed investment “will create a significant impact to boost [the] economy and jobs” and create a “huge ecosystem for ancillary industries”.
This MoU is an important step accelerating India’s semi-conductor manufacturing ambitions. The investment of Rs 1.54 lakh crore will create a significant impact to boost economy and jobs. This will also create a huge ecosystem for ancillary industries and help our MSMEs. https://t.co/nrRbfKoetd
— Narendra Modi (@narendramodi) September 13, 2022
Last September, Chandrasekhar had himself described the Foxconn-Vedanta JV on semiconductor manufacturing as “an opening of a door to many decades of huge opportunities.” On Monday, however, he was quick to dial back this hype when the news of Foxconn’s exit broke. The minister denied there had been any setback for the government, arguing that the break-up didn’t matter since Foxconn and Vedanta both lacked actual experience with semiconductors to begin with.
“It’s not for the government to get into why or how two private companies choose to partner or choose not to, but in simple terms … both companies can and will now pursue their strategies in India independently, and with appropriate technology partners in Semiconductors and Electronics,” he noted in a series of tweets.
Junior IT minister Rajeev Chandrasekhar’s tweet thread on Foxconn’s exit. Photo: redd.it
Vedanta, for its part, in a statement, said that it will continue to grow its semiconductor team, and said it has the license for production-grade technology for 40nm [chips] from a prominent Integrated Device Manufacturer (IDM). “India remains pivotal in repositioning global semiconductor supply chains,” the statement stressed.
With the buzz created by the news of the joint venture falling through, Foxconn’s statement sought to convey that it was not walking out of the Indian semiconductor space entirely and that it still supported the Indian government’s domestic chip-making efforts. Going forward, it said, it would “establish a diversity of local partnerships that meet the needs of stakeholders”.
“This is not a negative. There was recognition from both sides that 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,” Foxconn said, about the joint venture, according to The Economic Times.
It also said it is planning to apply for incentives that the government is offering under its semiconductor policy. “Foxconn is working toward submitting an application,” the company said.
Foxconn is famous globally for assembling iPhones and other Apple products. In recent years, the company has been expanding into chips to diversify its business.