Will the Exit of Foxconn From its Joint Venture With Vedanta Impact the Chip Manufacturing Future of India?

Taiwanese firm Foxconn is set to establish a joint chip-manufacturing venture with Vedanta in the Indian state of Gujarat. China dominates the global semiconductor market, but this deal could create a robust semiconductor-making ecosystem in India. However, on July 10th, Foxconn announced its decision to back out of the $19.5 million joint chip-making venture with Indian conglomerate Vedanta, citing issues such as slow progress. The Indian representative of Foxconn stated on Tuesday that the split was a mutual decision between both sides due to slower-than-desired progress in the project. The Gujarat government is still in talks with Foxconn for its semiconductor plant.

The JV between Foxconn and Vedanta was signed in February 2022 and aimed to significantly boost domestic manufacturing of electronic items in India, making India a hub for semiconductors and generating more jobs and revenues for the country. This exit of Foxconn from the JV has raised many speculations regarding a massive setback for Prime Minster Narendra Modi's plan for a chip-making plant in India. However, Union IT Minister of the State, Rajeev Chandrashekhar, cleared the speculations by tweeting that Foxconn's exit from the joint venture with conglomerate India's Vedanta will not impact India's Semiconductor plant goal as both the companies had no prior experience in semiconductors or technology and were expected to source fabrication for the same from some other tech company.

As for now, both companies are determined to launch a semiconductor plant in India and are looking for new partners. India's Vedanta has claimed that they have other partners lined up for the project. However, Taiwan's Foxconn is in talks with TMC and Japan-based TMH for the same. Several other companies, especially from the United States, are eagerly looking to invest in semiconductor facilities in India, majorly because of the incentives given by the government. Other than Vedanta-Foxconn JV, Singapore -based IGSS Ventures and Global Consortium ISMC, which sourced fabrication from Tower Semiconductor as a Tech Partner, also applied for incentives last year. The government is offering two major incentives: government subsidies, which are attractive to many companies, and tactic support given by the government of the U.S.

Further, the Union IT Minister has stated that Vedanta has already submitted a 40nm fabrication proposal with a technology licensing agreement from a major Global Semicon. This proposal is currently being evaluated by the Indian government's Semicon India Tech Advisory group.

On July 11th, Vijay Nehra, the secretary of the Science and Technology Department Gujarat, said that they are in touch with multiple prospective investors, including Foxconn, for India's Semiconductor Plant. Many other key players have shown interest in investing in the Gujarat Chip manufacturing plant, particularly Micron Technology. It said that it would invest up to $825 million in a semiconductor packaging and testing facility in the state. It would be interesting to know who will eventually take the opportunity to invest in one of the fastest-growing economies, India.