In a blow to India’s ambitions of becoming a significant chipmaker, Taiwan’s Foxconn said on Monday it has withdrawn from a $19.5 billion semiconductor joint venture with Indian metals-to-oil conglomerate Vedanta. The move is a setback to Prime Minister Narendra Modi’s chipmaking plans for India, which have been a key plank in his economic strategy to usher in a new era of electronics manufacturing.
Foxconn, the world’s largest contract electronics maker, and Vedanta signed a pact last year to establish semiconductor and display production plants in Modi’s home state of Gujarat. The project was expected to create over 100,000 jobs in the state and help transform India into a global player in electronics production.
Vedanta, which owns a 63% stake in the JV, said it had worked with Foxconn for over a year to turn what it described as “a great semiconductor idea into reality,” but the two sides mutually decided to end the JV. It also said it would remove the Foxconn name from what now is a fully-owned Vedanta entity. The company did not give any reason for the decision.
The decision to drop the project comes as India needs help attracting foreign investment to establish local chipmaking capabilities. Semiconductors are critical to many consumer devices, including smartphones and tablets, and are the building blocks for much larger components such as auto parts.
While many of the world’s most advanced chips are made in Asia, late-entrant India is trying to become a chipmaking hub and help its emerging markets access high-tech electronic devices. But the plan has been plagued by problems, including regulatory hurdles and a lack of expertise in advanced technology.
Foxconn’s withdrawal from the project is the latest in a series of setbacks to the country’s chipmaking aspirations. Last week, India’s market regulator fined Vedanta for breaching disclosure rules after it published a press release that made it appear that the company had partnered with Foxconn to make chips in the country. The company later clarified that the JV was being run by its holding firm, Volcan Investments, not Foxconn.
REUTERS HAS REPORTED THAT the JV between Vedanta and Foxconn had been in trouble for some time. The project was slowly moving as talks involving European chipmaker STMicroelectronics as a technology partner were deadlocked. 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, a source with direct knowledge of the matter said.
A few weeks ago, Vedanta’s global managing director for semiconductors and displays, Akarsh Hebbar, told Forbes India that the JV would focus on more mature semiconductor nodes, such as 40nm and 28nm, to serve growing demand in the EV and smartphone markets. Hebbar, spearheading the Vedanta-Foxconn initiative, added that the company was working toward achieving a monthly production target of 10 wafers by 2023. The company had a facility to make flat panel displays, called fabs, in Gujarat.
