In a surprising turn of events, Taiwan-based Hon Hai Technology Group, widely known as Foxconn, has pulled out of its joint venture (JV) with the Vedanta Group for semiconductor manufacturing in India.
Foxconn-Vedanta JV had announced earlier this year that a semiconductor fabrication and display manufacturing facility would be set up in the Dholera Special Investment Region, near Ahmedabad, focusing on the production of 28-nanometre semiconductors.
However, Foxconn made it clear that it was not completely withdrawing from the Indian semiconductor space and affirmed its support for the Indian government's domestic chip-making efforts.
The company stated its intention to forge diverse local partnerships that cater to the needs of various stakeholders.
The joint venture had even submitted an application under the modified production-linked incentive scheme, which would have covered half of the project's cost.
Despite this setback, India's Minister of Communications, Electronics, and Information Technology, Ashwini Vaishnaw, emphasised that both Foxconn and Vedanta remain committed to India's semiconductor mission and the "Make in India" initiative.
Government sources have revealed that Vedanta and Foxconn are still actively considering their respective semiconductor plans for India. The companies intend to pursue their strategies independently and are expected to collaborate with separate technology partners.
This development, as reiterated by Minister of State for Electronics and IT Rajeev Chandrasekhar, does not impact India's goal of establishing a semiconductor fabrication plant.
He emphasised that the decision of two private companies to partner or not does not concern the government, but it allows both entities to pursue their strategies in India independently.
Chandrasekhar pointed out that both Foxconn and Vedanta have made significant investments in India and are esteemed investors who contribute to job creation and economic growth.
It was widely known that neither company possessed prior semiconductor experience or technology and were expected to source fabrication technology from technology partners.
While their joint venture, VFSL, initially proposed a 28-nanometre fabrication plant, they were unable to secure an appropriate technology partner for that proposal, he added.
However, Vedanta, through VFSL, recently submitted a 40-nanometre fabrication proposal supported by a technology licensing agreement with a global semiconductor major, which is currently under evaluation by the government's Semiconductor India Tech Advisory group.
Chandrasekhar affirmed that India's strategy to catalyse the semiconductor ecosystem has made significant progress since Prime Minister Narendra Modi approved the country's semiconductor strategy and policy.
He dismissed concerns about Foxconn and Vedanta's decision being a setback to India's semiconductor ambitions and emphasised that it would be unwise to bet against India's determination in this field.
The failure of the Foxconn-Vedanta joint venture, however, may have been inevitable from the beginning.
Firstly, their application for semiconductor fabrication in India lacked transparency regarding their technology partner, which raised concerns given the Indian semiconductor policy's aim of developing a commercially viable ecosystem.
While other applicants, such as ISMC, were fully transparent about their technology partners, the ambiguity surrounding Vedanta-Foxconn's application was a significant flaw. ISMC, which had a tie up with Tower Corporation for a $3 billion technology project, have been asked to submit a fresh proposal.
Secondly, it was surprising that the Ministry of Electronics and Information Technology (MEITY) entertained an application with such foundational ambiguity, particularly when its ministers were vocal in support of the venture.
Both Vedanta and Foxconn must provide clear answers regarding their technology partner before expecting incentives for their capital expenditure from the Indian taxpayer.
To receive government approval to set up semiconductor fabrication in India, the companies are expected to either own a fabrication unit for semiconductor chips in the 65-28 nanometre range or possess the “production-grade licensed technologies” to make 28 nm chips. Evidently the JV failed to make the grade on this prerequisite.
The collapse of the Vedanta-Foxconn joint venture serves as a reminder of the challenges and complexities involved in establishing a robust semiconductor industry in India.
It underscores the importance of transparency, clarity, and strong partnerships in driving the country's semiconductor ambitions forward.
While setbacks are part of the journey, India's determination and commitment to fostering a competitive semiconductor ecosystem should not be underestimated.
On a hopeful note, India's semiconductor mission notched up a success finalising a deal with Micron, which has agreed to invest $285 million in a chip testing and packaging plant. Micron is also being persuaded to set up a memory chip manufacturing unit.
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