Foxconn, HCL announce JV to set up semiconductor OSAT in India

Taiwan’s Foxconn Technology Group and India’s HCL Group will form a joint venture (JV) to set up a semiconductor outsourced assembly and testing (OSAT) unit, where Foxconn will hold 40% equity with an investment of $37.2 million, the companies individually confirmed on Wednesday.

“HCL Group plans to partner with Foxconn Group to establish OSAT operations in India. HCL Group has a strong engineering and manufacturing heritage and this is an opportunity that provides strategic adjacency to the Group portfolio,” an HCL Group spokesperson said in response to queries.

A Foxconn spokesperson said: “Foxconn looks forward to jointly setting up OSAT operations in India with HCL. Through this investment, the partners aim to build an ecosystem and foster supply chain resilience for the domestic industry. Foxconn will deploy its BOL, or build-operate-localize, model to support local communities.”

Foxconn Hon Hai Technology India Mega Development Pvt. Ltd, a subsidiary of Foxconn Technology Group, informed the Taiwan Stock Exchange on Wednesday that the JV was a non-binding memorandum of understanding and would be followed by negotiations.

A senior industry veteran with knowledge of the matter told Mint that the proposal currently remains under consideration with the India Semiconductor Mission.

Industry insiders added that since HCL has had semiconductor design and testing software expertise for a long time, besides existing partnerships with a number of top chipmakers, a partnership with Foxconn made sense for both parties. “What needs to be seen is how the specifics of the project play out,” a second executive said.

The partnership announcement comes a day after minister of state for electronics and information technology (IT) Rajeev Chandrasekhar said the government has so far received nine proposals for setting up different kinds of semiconductor fabrication units as well as plants that will test the semiconductors made elsewhere in the world.

“After Micron’s successful investment, there has been an extremely robust pipeline of proposals that have come. There’s a lot more interest. There are two very serious fab proposals, four OSAT proposals and three compound fab proposals,” he said on Tuesday while briefing on the National Startup Day. The minister did not name the companies that have submitted proposals.

US-based Micron Technology Inc. had announced an $825 million investment into its assembly, testing, monitoring and packaging (ATMP) plans in India, and started construction of its first unit in September last year, with plans to produce the first packaged chip by the end of this year.

While Foxconn Technology Group was among the first set of applicants to the scheme, it pulled out of its JV with Vedanta Ltd last year. The JV had planned to invest $20 billion in India for setting up a semiconductor fabrication unit, display unit and semiconductor assembly and testing unit.

The 60:40 partnership could have set up the country’s first semiconductor manufacturing unit under the $10 billion government-backed financial incentive scheme. However, after the fallout, both parties said they will proceed with their plans independently.

Industry watchers said Foxconn had a significant instrumentation expertise in setting up a mass-scale plant, and globally it is also looking to diversify from contract manufacturing because of market slowdown concerns.

“They essentially operate in a low-margin business of less than 5%, which an OSAT business can help them improve. Their presence in Taiwan means that they can bring key companies from the semiconductor supply chain,” said a senior industry executive asking not to be named.