Foxconn withdraws from $19.5bn chip JV with India’s Vedanta

Taiwanese electronics manufacturer Foxconn on Monday said it has pulled out of a joint venture with Indian mining conglomerate Vedanta to produce semiconductors locally, dealing a blow to New Delhi’s efforts to make India a chipmaking hub.

The two companies last year announced a $19.5 billion investment to manufacture semiconductors and display units in Prime Minister Narendra Modi’s home state of Gujarat in western India.

Foxconn said in a statement that it mutually agreed with Vedanta to withdraw from the JV, adding that both companies had “worked hard to bring a great semiconductor idea to reality.”

The Taiwanese contract manufacturer did not elaborate on what triggered its exit.

Vedanta said in a statement that it has “lined up other partners,” without divulging details.

“We will continue to grow our semiconductor team, and we have the license for production-grade technology for 40 nanometer [chips] from a prominent integrated device manufacturer,” the company said. “We will shortly acquire a license for production-grade 28nm as well.”

Foxconn’s departure from the partnership with Vedanta comes as a setback to India’s plans to bolster its manufacturing sector.

India hopes to benefit from a push by international conglomerates to develop alternative manufacturing hubs outside China as geopolitical tensions between Beijing and Washington intensify. New Delhi wants to turn the country into a global manufacturing hub, which it envisions as crucial in making India a $5 trillion economy.

Electronics manufacturing is one area of focus for India, which targets a turnover of $400 billion by 2025. The government in 2021 approved $10 billion in incentives to spur local manufacturing of semiconductors. Eligible manufacturing projects will get support for up to half the cost of setting up shop, which had prompted the likes of Vedanta to step up.

The Foxconn-Vedanta venture was among three entities seeking the incentives for semiconductor manufacturing. The other contenders were a consortium called ISMC, which includes Tower Semiconductor of Israel as a technology partner, and Singapore-based IGSS Ventures. Both committed investments of $3 billion each.

But none of the three entities received government approval for incentives.

Instead, India has invited fresh applications from chip manufacturers for subsidies, with electronics and information technology minister Ashwini Vaishnaw telling local media in May that he had “fruitful” meetings with chipmakers from the U.S. and Europe. U.S. chipmaker Micron said last month that it will invest $825 million in India to build a semiconductor assembly and testing plant.

Micron, whose products recently were banned in China on security grounds, said the project will cost $2.75 billion, with the central government bearing half of the cost through production-linked incentives and the state government in Gujarat, where the manufacturing unit will be built, paying another 20%.