Foxconn pulls out of chip manufacturing deal  

  • Hon Hai Technology Group, also known as Foxconn, based in Taiwan, has announced its departure from a $19.5 billion semiconductor joint venture with the Vedanta Group.
  • Foxconn’s decision comes as the company seeks alternate development prospects.

Background and JV Details

  • The joint venture planned to build a semiconductor manufacturing unit in Gujarat, India.
  • The factory was designed to manufacture 28 nanometer semiconductors.
  • The collaboration was supposed to strengthen India’s semiconductor manufacturing capacity.

Foxconn’s Refusal to Meet Technology Transfer and Investment Requirements:

  • According to reports, the corporations were unable to meet the government’s expectations for additional technology transfer and investment from STMicroelectronics, a European firm.
  • Financial Restriction: Foxconn’s decision to exit the joint venture is thought to have been influenced by Vedanta’s substantial debt burden and ability to finance the acquisition of chipmaking technology.
  • Differences and Lack of Progress: Senior government officials indicate that the joint venture ran into difficulties and disagreements, leading to Foxconn’s decision to exit many months ago.
  • Foxconn stated the desire to pursue a broader variety of development prospects as the basis for its exit from the joint venture.

Vedanta’s Reaction

  • Vedanta’s Commitment: Vedanta claimed that it will pursue other partnerships and emphasised that it has a licence for production-grade technology for 40nm chips from a well-known Integrated Device Manufacturer (IDM).
  • The Importance of India in Semiconductor Supply Chains: Vedanta emphasised India’s importance in global semiconductor supply chain repositioning efforts.
  • Independence and New Partners: Vedanta plans to remove the Foxconn name from the fully-owned firm and seek agreements with other corporations in order to construct India’s first foundry.
  • Vedanta emphasises its possession of a licence for production-grade technology for 40 nm chips, as well as the upcoming acquisition of a licence for production-grade 28 nm chips.
  • Government Review: The government will review Vedanta’s plan, but the lack of Foxconn may impede the application’s advancement.

The government’s stance

  • Commitment to India’s Semiconductor Mission: The Minister of Electronics and Information Technology emphasised that both Foxconn and Vedanta are committed to India’s semiconductor mission and the Make in India programme.
  • Semiconductor Growth: The government intends to continue developing India’s semiconductor industry and attracting new investors.

Uncertainty Over Other Proposals

  • ISMC Proposal: ISMC, funded by Next Orbit and Tower Semiconductor, has requested that its proposal not be considered owing to Intel and Tower Semiconductor’s imminent merger. The proposed $3 billion semiconductor factory in Karnataka is expected to be put on hold until the merger is completed.
  • Proposal for IGSS Venture: The application from Singapore-based IGSS Venture did not meet the criteria established by the government’s advisory council and is currently on hold.

The Importance of Chip Manufacturing in India

  • India has recognised electronics industry, especially chip manufacture, as a crucial area for domestic output and export growth.
  • Domestic Supply Chain: Chip production is critical to establishing a domestic electronics supply chain and minimising dependency on imports, notably from China.
  • India has the potential to emerge as a trustworthy destination for semiconductor manufacture as corporations strive to diversify their manufacturing bases away from China.
  • Global Context: The United States has passed the CHIPS Act, which provides large domestic subsidies for chip manufacture while imposing limits and sanctions on China’s semiconductor industry.
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