Foxconn exits $19.5bn Vedanta chipmaking plant in India

Indian government says it remains confident of attracting investors for semiconductor production

Vedanta said it is fully committed to its semiconductor project. Reuters

Taiwan's Foxconn has withdrawn from a $19.5 billion semiconductor joint venture with Indian metals-to-oil conglomerate Vedanta, it said on Monday.

The world's largest contract electronics maker signed a pact with Vedanta last year to set up semiconductor and display production plants in Prime Minister Narendra Modi's home state of Gujarat.

“Foxconn has determined it will not move forward on the joint venture with Vedanta,” a Foxconn statement said, without elaborating on the reasons.

The company said it had worked with Vedanta for more than a year to bring “a great semiconductor idea to reality”, but they had mutually decided to end the joint venture and it will remove its name from an entity that is now fully owned by Vedanta.

Vedanta said it is fully committed to its semiconductor project and had “lined up other partners to set up India’s first foundry”.

“Vedanta has redoubled its efforts” to fulfil Mr Modi's vision, it added in a statement.

Mr Modi has made chipmaking a top priority for India's economic strategy in pursuit of a “new era” in electronics manufacturing.

“This deal falling through is definitely a setback for the ‘Make in India’ push,” said Neil Shah, vice president of research at Counterpoint. He added that it also does not reflect well on Vedanta and “raises eyebrows and doubts for other companies”.

Deputy IT minister Rajeev Chandrasekhar said Foxconn's decision had “no impact” on India's plans and added that both companies were “valued investors” in the country.

He said it was not for the government to “get into why or how two private companies choose to partner or choose not to”.

Foxconn is best known for assembling iPhones and other Apple products but in recent years, it has been expanding into chips to diversify its business.

Most of the world's chip output is limited to a few countries, with India a late entrant.

The Vedanta-Foxconn venture announced its chipmaking plans in Gujarat last September, with Mr Modi calling the project “an important step” in boosting India's chipmaking ambitions.

But the plan had been slow to take off. Among other problems encountered by the Vedanta-Foxconn project were deadlocked talks to involve European chipmaker STMicroelectronics as a tech partner, Reuters has previously reported.

While Vedanta-Foxconn managed to get STMicro on board for licensing technology, India's government had made clear it wanted the European company to have more “skin in the game”, such as a stake in the partnership.

STMicro was not keen on that and the talks remained in limbo, a source has said.

The Indian government has said it remains confident of attracting investors for chipmaking.

Micron last month said it would invest up to $825 million in a chip testing and packaging unit, not for manufacturing. With support from India's federal government and the state of Gujarat, the total investment will be $2.75 billion.

India, which expects its semiconductor market to be worth $63 billion by 2026, last year received three applications to set up plants under a $10 billion incentive scheme.

These were from the Vedanta-Foxconn joint venture, Singapore-based IGSS Ventures and global consortium ISMC, which counts Tower Semiconductor as a tech partner.

The $3 billion ISMC project has stalled, too, owing to Tower being acquired by Intel, while another $3 billion plan by IGSS was also halted because it wanted to resubmit its application.

India has reinvited applications for the incentive scheme from companies.