The collapse of the Foxconn-Vedanta Chip Plant Joint Venture
Foxconn and Vedanta are highly esteemed investors in India, making substantial investments and contributing to the creation of jobs and growth prospects. In September 2022, the government commended the partnership between Vedanta and Foxconn for their semiconductor and manufacturing plant in Gujarat, considering it a significant achievement. However, within a year, there have been notable developments as Foxconn has decided to withdraw from the joint venture and abandon plans for a deal worth $19.5 billion without specifying any solid reason. But the question is why? Why did the joint venture collapse?
As electronic devices increasingly rely on semiconductor chips, many companies are seeking alternatives to China and view India as a potential reliable destination for diversification. However, something significant must have occurred for Foxconn, a major Taiwanese company, to exit the joint venture.
Foxconn has not given any official statement nor has it specified any rationale behind this decision. But instances like Foxconn, a major chip buyer and electric vehicle player, faced challenges and modifications in a joint venture where they agreed to repurchase 28 nm chips. The venture later included 40 nm chip manufacturing, but technology negotiations caused delays and uncertainties, leading to Foxconn's withdrawal. Also, the news of Vedanta’s financial stress to reduce its high debt delayed the project further. However, the joint venture faced difficulties in securing a technology partner as they lack the knowledge and expertise required for chip manufacturing hence, they couldn’t move ahead. Since the joint venture was announced, the plan saw repeated changes, initially in July 2022 It was planned to start in Maharashtra but it moved to Gujarat in September as better incentives were offered there. They also faced regulatory troubles where they were fined $36,000 by SEBI for not disclosing their partnership in the right manner and two weeks later the whole thing was called off.
The government confirmed that the termination of the $19.5 billion semiconductor joint venture between Foxconn and Vedanta would not affect India's plans. Minister of State for IT, Rajeev Chandrashekhar, reassured on Twitter that Foxconn's withdrawal would have no impact on India's semiconductor fabrication goals.
Vedanta reaffirms its complete dedication to the semiconductor fab project and states that alternative partners have been arranged for establishing India's first chip manufacturing facility. Foxconn, though it has withdrawn from Vedanta they don’t plan on withdrawing from India and look to evaluate their options in a diversity of local partners as they see India successfully establishing a robust semiconductor manufacturing ecosystem.
The Semiconductor team will persistently expand and develop. Vedanta has intensified its efforts to realize the Prime Minister's semiconductor vision, playing a crucial role in reshaping global semiconductor supply chains.
Kautilya, IBS Mumbai.