Foxconn Withdraws From Semiconductor Deal With India's Vedanta

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Facts

  • On Monday, Taiwanese company Foxconn, the world's largest electronics maker, announced that it has withdrawn from a $19.5B deal with Indian natural resources conglomerate Vedanta to set up semiconductor and display factories in the Indian state of Gujarat.1
  • In a statement, Foxconn said the project, set into motion last year, was "not moving fast enough" and that it had been terminated by "mutual agreement." Vedanta will be assuming full control of the venture.2
  • However, in a follow-up statement, the Taiwanese company said it plans to apply for a government subsidy to eventually open semiconductor fabrication plants in the country and remain "committed to invest [sic] in India." Foxconn already has factories in the states of Andhra Pradesh and Tamil Nadu.3
  • The joint venture would have produced around 40K 40-nanometer semiconductors per month. The original proposal sought to produce 28-nanometer semiconductors, but the two companies couldn't locate an appropriate technology partner.4
  • While Foxconn didn't give a reason for the withdrawal, India's minister for entrepreneurship, skill development, electronics, and technology said the pair couldn't source technology partners, with both companies lacking semiconductor experience. He said the drawback has "no impact" on India's semiconductor goals.4
  • Delays in government incentives and stalled licensing negotiations with European technology firm STMicroelectronics are also believed to have contributed to Foxconn's decision. While the developments are a blow to PM Narendra Modi's plan to make India a chipmaking powerhouse, US chipmaker Micron announced in June an $825M investment in chip packaging and testing, but not manufacturing.5

Sources: 1Reuters, 2BBC News, 3CNN, 4South China Morning Post, and 5Al Jazeera.

Narratives

  • Narrative A, as provided by Yahoo Sports. Modi's vision of India competing with the world's powerhouses is growing fainter with each stalled project. Billions of dollars in chipmaking investments are stuck in limbo as companies remain hesitant to pull the trigger on developments, sometimes stemming from concerns over India's much-touted incentives in chipmaking. For the time being, India will remain a destination, not a source, of the world's semiconductors.
  • Narrative B, as provided by OpIndia. In spite of dire predictions, this setback doesn't affect India's chipmaking trajectory whatsoever, as Foxconn has already reapplied for government incentives to pursue semiconductor investments in the country. India's chipmaking industry will be a global leader in the near future as companies, including Foxconn, continue to court the Indian government in an effort to tap into this lucrative market.