Foxconn Abandons India Chip Venture With Vedanta

Taiwan’s Foxconn Technology said it has ended a partnership to make chips with India-focused resources conglomerate Vedanta, a setback to India’s nascent plans to become a semiconductor manufacturing hub.

The two companies announced the nearly $20 billion collaboration last year, which was slated to set up a plant in Gujarat, the home state of Prime Minister Narendra Modi, who has sought to turn India into an electronics manufacturing hub with the help of billions of dollars of incentives for companies that “Make in India.” Incentives for chip makers marked a new level of ambition for the program and came as the U.S.-China rivalry increasingly centered on the components critical for high-tech manufacturing.

“In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta,” said Foxconn, formally known as Hon Hai Precision Industry. The contract manufacturer is one of Apple’s biggest suppliers, and operates factories in India.

The company said it is working to remove its name from a project that is now fully owned by Vedanta, which said Monday it remains committed to setting up India’s first foundry.

“Vedanta has redoubled its efforts to fulfill the prime minister’s vision for semiconductors and India remains pivotal in repositioning global semiconductor supply chains,” the metals-and-energy group said. It said it has secured a license from a prominent chip maker for the technology to manufacture a larger, more established type of chip.

India’s junior tech minister Rajeev Chandrasekhar, a major proponent of India’s foray into chips, said on Twitter that the dissolution of the joint venture wouldn’t affect the country’s chip-making plans.

“This decision of Foxconn to withdraw from its JV wth Vedanta has no impact on India’s #Semiconductor Fab goals. None,” said the minister. “India is just getting started.”

In June, during Modi’s visit to the U.S., Micron Technology, the largest U.S. memory-chip manufacturer, said it would invest more than $800 million toward a semiconductor facility in Gujarat.

The minister said the Foxconn-Vedanta collaboration hadn’t been able to get a tech partner to help them secure the know-how to make the types of chips they had applied to produce. 

India has no experience in chip manufacturing and experts said a major hurdle facing the joint venture project from the start was that the two companies were novices in the semiconductor space.

“Both the players are new to this. They haven’t manufactured chips before,” said Neil Shah, vice president of research at Counterpoint Research. “I don’t see there was ever much buy in from the industry.” 

Shah said it may turn out to be a blessing in disguise that the project foundered at an early stage, making way for other efforts. India should focus its incentives program on prominent, experienced semiconductor players such as Micron, he said. 

“The government needs to do their due diligence as well,” Shah said.

Write to Tripti Lahiri at [email protected] and Yoko Kubota at [email protected]