Foxconn, the world's largest contract electronics maker, and
Vedanta signed a pact last year to set up semiconductor and display production
plants in PM 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 and India's IT ministry did not reply immediately to
requests for comment.
PM Modi has made chipmaking a top priority for India's
economic strategy in pursuit of a "new era" in electronics
manufacturing and Foxconn's move represents a blow to his ambitions of luring
foreign investors to make chips locally for the first time.
“This deal falling through is definitely a setback for the
‘Make in India' push,” said Neil Shah, Vice President of research at
Counterpoint, adding that it also does not reflect well on Vedanta and
"raises eyebrows and doubts for other companies".
Foxconn is best known for assembling iPhone models 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, such as Taiwan, with India a late entrant. The Vedanta-Foxconn
venture announced its chipmaking plans in Gujarat last September, with PM Modi
calling the project "an important step" in boosting India's
chipmaking ambitions.
But his plan had been slow to take off. Among 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 will 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 the company wanted to re-submit its application. © Reuters
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