Foxconn-Vedanta’s ambitious $19.5 billion deal to manufacture semiconductors in India went sour on Monday.
The Union Minister of State for Electronics and IT Rajeev Chandrasekhar had a view on why What went wrong with Foxconn-Vedanta’s $19.5 billion deal to set up in Gujarat failed.
A tech partner was expected to source Fab technology as both companies had no prior semiconductor experience or technology. Chandrasekhar said in a tweet that Foxconn and Vedanta both have significant investments in India, but they couldn’t find a suitable tech partner for the proposal.
The JV that planned to set up a facility in Gujarat has been making slow progress, he said in May.
Delays & incentives
One of India’s top energy players, Vedanta, has entered into an agreement with a Taiwanese major for chip production in the 20-28 nm range.
In this regard, India plans to become a semiconductor manufacturing destination and get a piece of Taiwan’s pie, which manufactures over 90% of chips.
To gain an edge over China, semiconductor chips are essential components in electronic devices.
Foxconn pulled out of the venture due to concerns about incentives approval delays by the Union government, according to a source-based IANS report.
In order to request incentives from the government, the government raised questions about the costing provided. In addition, the government has decided to keep open the $10 billion financial incentive scheme with a 50% subsidy on semiconductor investments in India.
The Indian economy is just getting started
Currently, Vedanta is working on removing Foxconn’s name from the project and finding a new partner.
We have lined up other partners to set up India’s first foundry. Our semiconductor team will continue to grow, and we have a license for production-grade technology for 40 nm from a leading IDM. Vedanta said that a 28 nm license will be acquired shortly.
The Semicon India Tech Advisory Group is currently reviewing Vedanta’s 40 nm fab proposal backed by a tech licensing agreement from a global semiconductor major.
It is not the government’s job to explain why or how two private companies partner or do not partner, but, in simple terms, it means that both companies can and will pursue their strategies separately, and with appropriate technology partners in semiconductor and electronics, said the minister.
Chandrasekhar said that India is just getting started with semiconductor manufacturing locally
India’s semiconductor market was valued at $22.7 billion in 2019, according to a report by Counterpoint Research and the India Electronics & Semiconductor Association (IESA). According to the report, it will grow to $64 billion by 2026 – driven by consumer electronics, telecommunications, and IT hardware.
Timeline of the Foxconn-Vedanta’s deal
A scheme to boost semiconductor and display manufacturing in the country is approved by the Union Cabinet in December 2021.
Foxconn and Vedanta form a joint venture to manufacture semiconductors in February 2022
The partners sign agreements to build separate semiconductor and display production units in Ahmedabad by September 2022.
A 50% financial incentive for manufacturers of semiconductor fabs across technology nodes, compound semiconductors, packaging, and other chip facilities is approved by the Union Cabinet in September 2022.
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