Central Idea

Taiwan-based Hon Hai Technology Group, commonly known as Foxconn, has announced its withdrawal from a $19.5 billion semiconductor joint venture with the Vedanta Group.
The decision comes as Foxconn aims to explore alternative development opportunities.

Background and JV Details

The joint venture aimed to establish a semiconductor fabrication plant in Gujarat, India.
The plant was intended to produce 28 nanometer semiconductors.
The partnership was expected to boost India’s semiconductor manufacturing capabilities.

Fulfilling Technology Transfer and Investment Requirements: Reports suggested that the firms were unable to meet the government’s demands for increased technology transfer and investment from European firm STMicroelectronics.
Financial Constraints: Vedanta’s heavy debt burden and its ability to finance the acquisition of chipmaking technology are believed to have played a significant role in Foxconn’s decision to pull out of the joint venture.
Differences and Lack of Progress: Senior government officials confirm that the joint venture encountered difficulties and differences, leading to the realization several months ago that Foxconn would withdraw.
Diverse Development Opportunities: Foxconn cited the need to explore a wider range of development opportunities as the reason for its withdrawal from the joint venture.

Commitment from Vedanta: Vedanta stated that it will continue to pursue other partnerships and highlighted its possession of a license for production-grade technology for 40nm chips from a prominent Integrated Device Manufacturer (IDM).
Importance of India in Semiconductor Supply Chains: Vedanta reiterated the significance of India in global semiconductor supply chain repositioning efforts.
Independence and New Partners: Vedanta intends to remove the Foxconn name from the fully-owned entity and pursue partnerships with other companies to establish India’s first foundry.
Production Licenses: Vedanta highlights its possession of a license for production-grade technology for 40 nm chips and the forthcoming acquisition of a license for production-grade 28 nm chips.
Government Evaluation: The government will evaluate Vedanta’s proposal, but the absence of Foxconn may affect the progress of the application.

Commitment to India’s Semiconductor Mission: Electronics and Information Technology Minister assured that both Foxconn and Vedanta remain dedicated to India’s semiconductor mission and the Make in India program.
Continuation of Semiconductor Growth: The government aims to continue developing India’s semiconductor industry and attract further investments.

ISMC Proposal: ISMC, backed by Next Orbit and Tower Semiconductor, has requested that its proposal not be considered due to the pending merger between Intel and Tower Semiconductor. The proposal for a $3 billion semiconductor fab in Karnataka is expected to remain on hold until the merger is finalized.
IGSS Venture Proposal: The proposal by Singapore-based IGSS Venture did not meet the standards set by the government’s advisory committee and is currently on hold.

Strategic Sector: India has identified electronics manufacturing, including chipmaking, as a critical sector for domestic production and export growth.
Domestic Supply Chain: Chip manufacturing plays a crucial role in developing a domestic electronics supply chain, reducing reliance on imports, particularly from China.
Opportunity for India: As companies seek to diversify their manufacturing bases away from China, India has the potential to emerge as a reliable destination for semiconductor manufacturing.
Global Context: The US has passed the CHIPS Act, providing significant subsidies for chip manufacturing domestically, while imposing restrictions and sanctions on China’s semiconductor industry.

Foxconn’s withdrawal and uncertainties surrounding other proposals highlight challenges in India’s semiconductor manufacturing plans.
Financial constraints faced by Vedanta and the need for technology acquisition pose hurdles to realizing India’s chipmaking ambitions.
Nonetheless, India’s focus on chip manufacturing remains a strategic priority to develop a domestic electronics supply chain and reduce dependence on imports.