Foxconn junks $19.5 bn Vedanta chip plan

Taiwan's Foxconn has withdrawn from a $19.5 billion semiconductor joint venture with mining baron Anil Agarwal's Vedanta Ltd as the venture struggled to get a technology partner to make chips that are used in mobile phones to refrigerators and cars.

In a statement, Foxconn, the world's largest contract electronics maker, said it has determined it will not move forward on the joint venture with Vedanta.

Agarwal's metals-to-oil conglomerate responded saying it was fully committed to its semiconductor fab project and we have lined up other partners to set up India's first foundry.

It however did not give details of the new partners.

Foxconn, best known for assembling iPhones and other Apple products, and Vedanta last year signed a pact to set up semiconductor and display production plants in Gujarat.

European chipmaker STMicroelectronics was being roped in as a technology partner for the venture but talks were deadlocked.

Most of the world's chips are manufactured in a handful of countries and India, which expects its semiconductor market to be worth $63 billion by 2026, is a late entrant.

Three applications - one from the Vedanta-Foxconn joint venture, another from a global consortium of ISMC and one from Singapore-based IGSS Ventures - were received in response to the government's incentive scheme for local manufacture of semiconductors.

The other two applications too haven't made much progress.

Just last week, Vedanta announced that it will acquire the semiconductor and display glass units from group company Twin Star Technologies Ltd.

It is to buy 100 per cent of Vedanta Foxconn Semiconductors Pvt and Vedanta Displays Ltd from Twin Star, a unit of Vedanta's ultimate parent Volcan Investments Ltd.

In a statement on Monday Foxconn said: "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.

Foxconn said it is "working to remove the Foxconn name from what now is a fully-owned entity of Vedanta".

"Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future stakeholders," Hon Hai Technology Group (Foxconn) said.

The statement said that for over a year, Hon Hai Technology Group (Foxconn) and Vedanta have worked hard to bring a great semiconductor idea to reality. It has been a fruitful experience that can position both companies strongly going forward.

"Foxconn is confident about the direction of India's semiconductor development. We will continue to strongly support the government's 'Make In India' ambitions and establish a diversity of local partnerships that meet the needs of stakeholders," it said.

After the withdrawal, Vedanta asserted that it is fully committed to its semiconductor project and has lined up other partners to set up India's first foundry.

Vedanta said that it has redoubled efforts to fulfill Prime Minister Narendra Modi's vision for semiconductors and affirmed that India remains pivotal in repositioning global semiconductor supply chains.

"Vedanta reiterates that it is fully committed to its semiconductor fab project and we have lined up other partners to set up India's first foundry.

“We will continue to grow our semiconductor team, and we have the license for production-grade technology for 40 nm from a prominent Integrated Device Manufacturer (IDM)," Vedanta said in a statement.

The company had announced plans to set up its chip plant in Gujarat with an investment of around Rs 1.5 lakh crore.

"We will shortly acquire a license for production-grade 28 nm as well.

“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 statement said.

Minister of State for Electronics & Technology Rajeev Chandrasekhar said the Foxconn move will have "no impact on India's semiconductor fab goals. None”.

Stating that both Foxconn and Vedanta had significant investments in India, he said both companies had no prior experience or technology for chip manufacturing, and were expected to source fab tech from a tech partner.

"While their JV VFSL had originally submitted a proposal for 28nm fab, they could not source appropriate tech partner for that proposal," he tweeted.

"Vedanta thru VFSL has recently submitted a 40nm fab proposal backed by tech licensing agreement from a global semicon major - which is currently being evaluated.

He said it was not for govt to get into why or how two private companies choose to partner or choose not to.

"But in simple terms it means both companies can & will now pursue their strategies in India independently, and wth appropriate technology partners in semicon n electronics.

"To those editorializing abt this decision of Foxconn/Vedanta being a "blow" to India's Semicon ambition, I can only say its a bad idea to bet against India under PM Modi. India is just getting started," he added.