TAIPEI/BENGALURU, July 10 (Reuters) – Taiwan’s Foxconn withdrew from a $19.5 billion semiconductor joint venture with Indian metal-to-oil conglomerate Vedanta, it said on Monday, in a setback to manufacturing plans. of Prime Minister Narendra Modi’s chips for India.
The world’s largest contract electronics manufacturer signed a pact with Vedanta last year to set up semiconductor and display production plants in Gujarat, Modi’s home state.
“Foxconn (2354.TW) has determined that it will not advance the joint venture with Vedanta,” Foxconn said in a statement without elaborating.
The company said it had worked with Vedanta for more than a year to bring “a great semiconductor idea” to life, but they had mutually agreed to end the joint venture and will remove its name from an entity now wholly owned by Vedanta. . .
Vedanta said it is fully committed to its semiconductor project and had “aligned other partners to establish India’s first foundry.” “Vedanta has redoubled his efforts” to fulfill Modi’s vision, he added in a statement.
A source familiar with the matter said concerns over delays in the approval of incentives by the Indian government had contributed to Foxconn’s decision to pull out of the company. New Delhi also raised several questions about the cost estimates provided to apply for government incentives, the source added.
Modi has made chipmaking a top priority in India’s economic strategy as it seeks a “new era” in electronics manufacturing, and Foxconn’s move is a blow to its ambitions to attract foreign investors to make chips. locally for the first time.
“The fall of this deal is definitely a setback for the ‘Make in India’ momentum,” said Neil Shah, Counterpoint’s vice president of research, adding that it also doesn’t reflect well on Vedanta and “raises surprises 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 “valuable investors” in the country.
He said it was not for the government to “go into why or how two private companies choose to partner or choose not to partner.”
‘IMPORTANT STEP’
Foxconn is best known for assembling iPhones and other Apple (AAPL.O) but in recent years it has been expanding into chips to diversify its business.
Most of the world’s chip production is limited to a few countries, such as Taiwan, with India a late entrant. The Vedanta-Foxconn company 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 get off the ground. Among other problems the Vedanta-Foxconn project encountered were stalled talks to involve European chipmaker STMicroelectronics. (STMPA.PA) as a technology partner, Reuters has reported.
While Vedanta-Foxconn succeeded in getting STMicro involved in licensing the technology, the Indian government had made it clear that it wanted the European company to have more “skin in the game”, such as a stake in the partnership.
STMicro was not interested in that and talks remained in limbo, a source said.
The Indian government has said it remains confident of attracting investors for chipmaking. Micron said last month that it will invest up to $825 million in chip packaging and testing unit, not manufacturing. With the support of the federal government of India 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 the ISMC global consortium, which features Tower Semiconductor. (TSEM.TA) as a technology partner.
The $3 billion ISMC project has also been stalled due to Intel acquiring Tower, while another $3 billion IGSS plan has also been halted because it wanted to reapply.
India has once again invited companies to apply for the incentive scheme.
Reporting by Munsif Vengattil in Bengaluru, Ben Blanchard in Taipei, Aditya Kalra in New Delhi; Additional reporting by Rishika Saddam; Edited by David Goodman and Alexander Smith
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