Foxconn, which is a key manufacturer for Apple, has unexpectedly pulled out of a high-value partnership, initially agreed at $19.5 billion, with the Indian conglomerate Vedanta. This project was supposed to contribute significantly to Indian Prime Minister Narendra Modi’s vision of enabling India to manufacture its own semiconductors, thereby strengthening the nation’s economic landscape.
Despite committing last year alongside Vedanta to establish facilities for semiconductor and display manufacturing in Gujarat, Foxconn has now retracted its commitment. This sudden withdrawal by the renowned Taiwanese company, a major supplier for Apple, triggered a drop in Vedanta’s stock price by over 2 percent this past Tuesday.
“Foxconn will no longer pursue the agreed joint venture with Vedanta.”
Foxconn put forth an acknowledgment of this change without detailing the specific reasons, hinting at a consensual deal termination because progress was not occurring at an anticipated pace.
Foxconn’s Prospective Plant in India Stalls
The global chip manufacturing industry is heavily concentrated in certain nations such as Taiwan. India, aiming to energize its economy, announced its entry into this industry heavily dominated by a select few. Foxconn, primarily recognized for putting together Apple’s iPhones, had been broadening its horizons by venturing into semiconductor production.
The joint endeavor with Vedanta, announced in September 2022, was hailed by Modi as a monumental stride towards initiating a ‘new era’ in electronics manufacturing in India, thus supporting the country’s developmental aspirations.
The potential establishment of Foxconn in India was poised to attract even more international investment into the Asian nation’s nascent chip-making industry.
However, the decision to disband this collaboration has left Vedanta to proceed alone, as it continues to diligently seek other alliances to construct India’s premier semiconductor foundry.
Challenges and Complications for the Vedanta-Foxconn Project
It’s possible that delays in the approval of incentives from the Indian government played a part in Foxconn’s decision to exit the joint venture. Uncertainties over the estimated costs presented by the involved companies for procuring these government incentives might have also contributed to the dissolution of the partnership.
“The deal’s collapse is a blow to the ‘Make in India’ initiative and reflects negatively on Vedanta while casting doubt for future corporate partnerships.”
Additionally, stalled negotiations with the European semiconductor manufacturer STMicroelectronics regarding licensing technology became another hurdle. The Indian government expected a more significant investment from the European partner, which led to friction.
Nonetheless, India remains optimistic about its potential to entice chipmaking enterprises.
Last year alone, India received interest from three entities to establish semiconductor plants, benefiting from a $10 billion incentive program. It is projected that the semiconductor market in India could hit a valuation of $63 billion by the year 2026.
Moreover, Micron announced plans last month to invest up to $825 million in a facility for chip testing and packaging in India. With the Indian government’s support, the total investment could reach roughly $2.75 billion.
