Indian chipmaking partnership ends before it begins

Indian chipmaking partnership ends before it begins

Taiwan’s Foxconn, the world’s largest contract electronics maker, has withdrawn from a U$19.5 billion semiconductor joint venture with Indian conglomerate Vedanta.

The two companies agreed last year to set up semiconductor and display production plants in Gujarat. Foxconn said it had worked with Vedanta for more than a year to bring “a great semiconductor idea to reality”, but the would-be partners decided to end the joint venture. It is now fully owned by Vedanta.

It’s still not clear why the deal collapsed but it has been widely described in the Indian press as a setback to Prime Minister Narendra Modi’s chip manufacturing plans for India (not to mention the fact that the plants were due to be built in his home state). However, Vedanta has said it is fully committed to its semiconductor project and had “lined up other partners to set up India’s first foundry”. 

Was government regulation to blame? According to a Reuters source, concerns about incentive approval delays by India’s government had contributed to Foxconn’s decision to pull out of the venture. The government had apparently also raised several questions on the cost estimates provided to request incentives from the government. In addition, attempts to involve European chipmaker STMicroelectronics seem to have foundered.

The Vedanta-Foxconn venture announced its chipmaking plans last September. Prime Minister Narendra Modi called the project “an important step” in boosting India’s chipmaking ambitions.

But the Economic Times quotes the Minister of State for Electronics and IT, Rajeev Chandrasekhar, as saying (via Twitter), "This decision of Foxconn to withdraw from its JV with Vedanta has no impact on India's semiconductor fab goals. None."

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