Foxconn-Vedanta: How the $19.5 billion deal went kaput

• Neither of the companies had prior semiconductor experience or technology, says MoS IT Rajeev Chandrasekhar.
  
• As per IANS, incentive approval delays by the government might have contributed to Foxconn's decision to pull out of the venture.
  
• Vedanta says that it has lined up other partners to set up India’s first foundry.
  

Barely a year into signing an ambitious $19.5 billion deal to manufacture semiconductors in India, the Foxconn-Vedanta deal went sour and it was curtains on Monday.

While Foxconn did not give a reason for the same, the Union Minister of State for Electronics and IT Rajeev Chandrasekhar had a view on why the deal to set up a facility in Gujarat went wrong.

“It was well known that both companies had no prior semiconductor experience or technology and were expected to source Fab tech from a tech partner. They could not source an appropriate tech partner for that proposal,” Chandrasekhar said in a tweet, adding that both Foxconn and Vedanta have significant investments in India.

He had said earlier in May that the JV which had intended to set-up a facility in Gujarat, has been progressing slowly.

Incentives & delays

Vedanta, which is one of India’s top energy players, had entered into an agreement with the Taiwanese major which is known as the iPhone component maker — to make 20-28 nm size chips.

It is noteworthy here that India plans to become a semiconductor manufacturing destination and get a slice of Taiwan’s pie which manufactures over 90% of chips currently.

Semiconductor chips are essential components in electronic devices, and their manufacturing is key to gaining an edge over China.

The JV had gone through many delays, and has now gone completely kaput. As per a source-based IANS report, concerns about incentive approval delays by the Union government had contributed to Foxconn's decision to pull out of the venture.

The government had raised posers on the costing provided to request incentives from the government. The government has also decided to keep open the $10 billion financial incentive scheme with a 50% subsidy on investments for making semiconductors in India for potential applicants.

‘India is just getting started’

Now, Vedanta intends to go ahead with the project and is working on removing Foxconn’s name and finding a new partner.

"We have lined up other partners to set up India’s first foundry. We will continue to grow our semiconductor team, and we have the licence for production-grade technology for 40 nm from a prominent Integrated Device Manufacturer (IDM). We will shortly acquire a licence for production-grade 28 nm as well,” said Vedanta.

Chandrasekhar also said that Vedanta recently submitted a 40 nm fab proposal backed by tech licensing agreement from a global semiconductor major. It is currently under evaluation by Semicon India Tech Advisory group.

“It is not for the government to get into why or how two private companies choose to partner or choose not to but, in simple terms, it means both companies can and will now pursue their strategies in India independently, and with appropriate technology partners in semicon and electronics,” said the minister.

India is just getting started on semiconductor manufacturing locally, Chandrasekhar added.

As per a joint report by Counterpoint Research and the India Electronics & Semiconductor Association (IESA), India’s semiconductor market was valued at $22.7 billion in 2019. The report had also expected it to grow significantly to $64 billion by 2026 – driven by demand from consumer electronics, telecom, IT hardware and other sectors.

The Deal Timeline

December 2021: The Union Cabinet approves ₹76,000 crore scheme to boost semiconductor and display manufacturing in the country.

February 2022: Foxconn and Vedanta forge a JV to manufacture semiconductors

September 2022: The partners sign pacts to set up plans to build separate units for semiconductor and display production in Ahmedabad.

September 2022: The Union Cabinet tweaks the semiconductor scheme, approves 50% financial incentives for manufacturers of semiconductor fabs across technology nodes and compound semiconductors, packaging, and other chip facilities

May 2023: MoS IT Rajeev Chandrasekhar says that Foxconn-Vedanta JV is struggling to find a tech partner.

(With IANS inputs)