Foxconn dumps $19.5 bln Vedanta chip plan in blow to India (updated)

Tower Semiconductor

11/07/2023 24:30

(Repeats with no changes to text)

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      Modi wants India to become a semiconductor making hub
    

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      Foxconn pulls out of a key project planned with Vedanta
    

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      Foxconn says mutually reached decision with Vedanta 
    

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      Decision seen as a setback to PM Modi's ambitions
    

  
    By Ben Blanchard, Munsif Vengattil and Aditya Kalra
       TAIPEI/BENGALURU, July 10 (Reuters) - Taiwan's Foxconn
has withdrawn from a $19.5 billion semiconductor joint venture
with Indian metals-to-oil conglomerate Vedanta, it said on
Monday, in a setback to Prime Minister Narendra Modi's
chipmaking plans for India.
    The world's largest contract electronics maker signed a pact
with Vedanta last year to set up semiconductor and display
production plants in Modi's home state of Gujarat.
    "Foxconn  2354.TW  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 said it is fully committed to its semiconductor
project and had "lined up other partners to set up India’s first
foundry". "Vedanta has redoubled its efforts" to fulfil Modi's
vision, it added in a statement.
    A source familiar with the matter said concerns about
incentive approval delays by India's government had contributed
to Foxconn's decision to pull out of the venture. New Delhi had
also raised several questions on the cost estimates provided to
request incentives from the government, the source added.
    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".
    Deputy IT minister Rajeev Chandrasekhar said Foxconn's
decision had "no impact" on India's plans, adding that both
companies were "valued investors" in the country.
    He said it was not for the government to "get into why or
how two private companies choose to partner or choose not to".
    
    'IMPORTANT STEP'
    Foxconn is best known for assembling iPhones and other Apple
 AAPL.O  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 Modi calling the project "an
important step" in boosting India's chipmaking ambitions.
    But his plan had been slow to take off. Among other problems
encountered by the Vedanta-Foxconn project were deadlocked talks
to involve European chipmaker STMicroelectronics  STMPA.PA  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  TSEM.TA  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 it wanted to re-submit its application. 
    India has re-invited applications for the incentive scheme
from companies.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Timeline: Foxconn withdraws from Vedanta chip plan in India    https://reut.rs/3XQDHzu
Modi's chip making plan flounders as firms struggle to find tech
partners    https://reut.rs/3NO0hns
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 (Reporting by Munsif Vengattil in Bengaluru, Ben Blanchard in
Taipei, Aditya Kalra in New Delhi; Additional reporting by
Rishika Sadam; Editing by David Goodman and Alexander Smith)
 ((munsif.vengattil@thomsonreuters.com;))