Foxconn ends chip pact with Vedanta

New Delhi: Foxconn Technology Group has pulled out of its joint venture with Vedanta Ltd that 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, and was once estimated to be ahead of two other consortia in the fray for getting the sops.  

The government however downplayed the development saying that the differences between the two companies did not impact India’s plans to become a semiconductor manufacturing destination.  

“Both the companies are fully committed to developing India’s semiconductor industry and they’re fully committed to Make in India,” minister of electronics and information technology Ashwini Vaishnaw told Mint, noting that the announcements will not have an impact on India’s semiconductor mission. 

Rajeev Chandrasekhar, minister of state for electronics and information technology said in a Twitter post following the announcements that it was well known that both companies had no prior experience or technology and were expected to source fab technology from a technology partner. 

"While their JV VFSL had originally submitted a proposal for 28nm fab, they could not source appropriate tech partner for that proposal. 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 by the tech advisory group under the Indian Semiconductor Mission,” he added. 

Chandrasekhar noted that Foxconn and Vedanta, that had significant investments in India, both will pursue their strategies in India independently, and with appropriate technology partners in semicon and electronics.  

The government officials’ remarks followed statements from the companies on Monday.  

In one statement quoted by Reuters, the Taiwanese contract manufacturer has said that it was in the process of removing its name from the entity which has now been fully acquired by Vedanta Group under its holding company.  

"Foxconn 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," the world’s largest contract manufacturer said in a statement Monday.  

"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 added.  

Last week Vedanta Limited added semiconductor and display glass ventures to its diversified portfolio, under ultimate holding company of Vedanta Limited called Volcan Investments Limited. It will be wholly owned by the Agarwal family trust that is not listed on the exchanges. The development followed acquisition through share transfer at face value of a company called Twin Star Technologies Limited’s (TSTL) Semiconductor and Display SPVs, that is a wholly owned subsidiary of Volcan Investments Limited.  

The 60:40 JV, Vedanta Foxconn Semiconductors Private Limited, was a wholly owned subsidiary of TSTL. TSTL’s special purpose vehicles had signed Memorandum of Understanding (MoU) with the Gujarat government in September 2022 to set up the semiconductor and display fabs in Dholera.  

Following Foxconn’s statement, Vedanta Group did not comment on dismantling the joint venture and instead said that it would go ahead with its plans to set up a semiconductor fab. It highlighted that it had procured license for producing 40 nm chips from an integrated device manufacturer, without naming the company.  

“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),” the company said in the statement.  

“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 from Vedanta added.  

The Vedanta-Foxconn JV was among three consortia that had submitted applications when the government had first invited players under its $10 billion semiconductor manufacturing program in December 2021. Vedanta had announced its $ 20 billion ( ₹1.54 lakh crore) investment plan to set up a semiconductor chip and display manufacturing unit Gujarat, which included a display fab unit with investment of ₹94,500 crore and an integrated semiconductor fab unit and OSAT facility with investment of ₹60,000 crore. The semiconductor manufacturing fab unit would operate on the 28nm technology nodes.  

The International Semiconductor Consortium (ISMC) and Singapore's IGSS Ventures were the other two. ISMC is a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel's Tower Semiconductor, which is in the process of being acquired by Intel Inc since February, last year. The ISMC consortium had signed an MoU with the Karnataka government for a $3 billion fabrication plant in Mysuru, where it has sought 150 acres at Kochanahalli industrial area.  

Singapore-based IGSS Ventures Pvt Ltd had signed a memorandum of understanding with the Tamil Nadu government in July last year, for building a semiconductor hi-tech park which includes a fab unit with an investment of $3.5 billion or ₹25,600 crore over six years. 

The Centre had in October 2022, revised the financial incentives scheme increasing the subsidies from 30% to 50% of the project costs, for semiconductor fabs across all technology nodes, display manufacturing, compound semiconductors, silicon photonics, sensors fab and semiconductor ATMP (assembly, testing, marking and packing) facilities or OSAT (outsourced assembly and testing) facilities. It had also removed the subsidy cap of ₹12,000 crore, which was there earlier. Both IGSS and ISMC are yet to reapply under the revised scheme, according to government officials.