Foxconn halts $19.5bn Vedanta deal

Foxconn, the world’s largest contract electronics maker, has pulled out of a $19.5 billion semiconductor joint venture with Indian conglomerate Vedanta, dealing a setback to Prime Minister Narendra Modi’s chipmaking plans for India.

The agreement between Foxconn and Vedanta, signed last year, aimed to establish semiconductor and display production plants in Gujarat, Modi’s home state.

In a statement on Monday, Foxconn announced that it would not proceed with the joint venture with Vedanta, without providing further details on the reasons behind the decision. The company stated that it had collaborated with Vedanta for over a year to bring a semiconductor project to fruition but had mutually agreed to terminate the joint venture. Foxconn will remove its name from the entity, which is now fully owned by Vedanta.

Vedanta, on the other hand, expressed its full commitment to the semiconductor project and stated that it had lined up other partners to establish India’s first foundry. The company emphasised its dedication to fulfilling Modi’s vision.

Sources familiar with the matter indicated that concerns over delays in incentive approvals by the Indian government contributed to Foxconn’s decision to withdraw from the venture. The government in New Delhi had raised questions about the cost estimates provided to request incentives, further complicating the project.

Modi has prioritized chipmaking as a key element of India’s economic strategy, aiming to usher in a new era of electronics manufacturing. Foxconn’s withdrawal represents a setback to his efforts to attract foreign investors to manufacture chips in India for the first time.

Neil Shah, Vice President of Research at Counterpoint, described the collapse of the deal as a setback for the “Make in India” initiative and expressed doubts about future partnerships.

Deputy Information Technology Minister Rajeev Chandrasekhar sought to downplay the impact of Foxconn’s decision, stating that it would not affect India’s plans and emphasising that both companies were valued investors in the country. Chandrasekhar stated that it was not the government’s role to intervene in private companies’ decisions to partner or not.

Foxconn, primarily known for assembling iPhones and other Apple products, has been expanding into chip manufacturing in recent years to diversify its business. The semiconductor industry has been dominated by a few countries, with India being a late entrant.

The Vedanta-Foxconn venture faced various obstacles, including difficulties in involving European chipmaker STMicroelectronics as a technology partner. Talks remained deadlocked, as the Indian government expressed a desire for the European company to have a larger stake in the partnership.

Despite this setback, the Indian government remains confident about attracting investors for chipmaking. Micron recently announced plans to invest up to $825 million in a chip testing and packaging unit, while other companies have also shown interest in setting up semiconductor plants in India under incentive schemes. The government has reissued applications for the incentive program.