INDIA: In a setback to Prime Minister Narendra Modi’s ambitions of bolstering chipmaking in India, Taiwan’s Foxconn announced on Monday that it has pulled out of a $19.5 billion semiconductor joint venture with Indian conglomerate Vedanta.
The joint venture, which aimed to establish semiconductor and display production plants in Gujarat, had been part of PM Narendra Modi’s strategy to propel India into a “new era” of electronics manufacturing.
Foxconn, the world’s largest contract electronics manufacturer best known for assembling iPhones and other Apple products, has been diversifying its business into chips in recent years.
However, the company provided no specific reasons for withdrawing from the joint venture with Vedanta. In a statement, Foxconn stated that while it had collaborated with Vedanta for over a year to transform a “great semiconductor idea into reality,” both parties had mutually decided to terminate the joint venture.
Consequently, Vedanta will remove Foxconn’s name from what is now a fully-owned Vedanta entity. The Vedanta-Foxconn project had previously faced challenges, with talks involving European chipmaker STMicroelectronics as a partner reaching an impasse.
The Indian government had expressed a desire for STMicro to have a more significant stake in the partnership, such as a financial investment, but the company was reluctant to comply. This reluctance led to a deadlock in negotiations, hindering the project’s progress.
Prime Minister Modi has prioritized chipmaking as a critical element of India’s economic strategy and aimed to attract foreign investors to establish local chip manufacturing facilities for the first time.
With Foxconn’s withdrawal, these plans face a significant setback, impacting the government’s goal of making India’s semiconductor market worth $63 billion by 2026.
India received three applications under a $10 billion incentive scheme to set up chip plants, including the Vedanta-Foxconn joint venture, a consortium called ISMC with Tower Semiconductor as a partner, and Singapore-based IGSS Ventures.
However, the ISMC project worth $3 billion has also stalled due to Tower Semiconductor’s acquisition by Intel, while IGSS Ventures halted its $3 billion plan to re-submit its application.
The withdrawal of Foxconn from the joint venture raises concerns about India’s ability to attract foreign investors for chip manufacturing.
The government may need to reassess its approach and explore alternative strategies to strengthen the domestic chip industry and achieve its vision of becoming a global player in electronics manufacturing.
Vedanta has yet to respond to requests for comment on Foxconn’s withdrawal. The development will prompt a review of the joint venture’s future and potential alternatives to realize India’s chipmaking aspirations.
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