Foxconn junks Rs 1.61 lakh crore Vedanta chip plan, Vedanta says other investors lined up

Taiwanese electronics manufacturer Foxconn said on Monday it has withdrawn from a joint venture with billionaire Anil Agarwal-led Vedanta Ltd, which was set up to produce semiconductors in India.

"Foxconn has determined it will not move forward on the joint venture with Vedanta," a Foxconn representative said in response to DH’s query seeking comment.

“Foxconn is working to remove the Foxconn name from what now is a fully-owned entity of Vedanta. Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future stakeholders,” the spokesperson said.

While Foxconn did not elaborate on the reason it is withdrawing from the JV, a source familiar with the matter told DH that the company's concerns about incentive approval delays by the government could be one of the reasons.

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"There was some discomfort at the pace of the approvals and the decision-making process in the government," the person said.

Last month, in a conversation with DH, David Reed, chief executive officer of Vedanta Foxconn Semiconductor, had also touched upon the complex and time-consuming regulatory approvals, leading to longer waiting periods for funding.

Meanwhile, Vedanta said on Monday that it has lined up other potential partners to set up India's first foundry for semiconductor manufacturing.

"Vedanta reiterates that it is fully committed to its semiconductor fab project,” the company said in a statement.

“We will continue to grow our semiconductor team, and we have the license for production-grade technology for 40 nm from a prominent Integrated Device Manufacturer (IDM). We will shortly acquire a license for production-grade 28 nm as well," the statement further added.

Last week the company announced the acquisition of a 100% stake in semiconductor and display units from sister concern Twin Star Technologies, a wholly-owned subsidiary of Volcan Investments Limited which is the ultimate holding company of Vedanta Limited. The transaction is expected to close during the ongoing quarter.

Foxconn and Vedanta signed a pact last year to invest $19.5 billion to set up semiconductor and display production plants in Gujarat, seeking to tap into the country's plans to become an electronics major. The company, which had submitted a proposal for manufacturing both 40 nm and 28 nm fab, has acquired the license for production-grade technology for 40 nm.

The JV had recently re-applied for government incentives under the modified semiconductor scheme in which the government had increased the financial incentive of 50% of the project cost for companies, consortia and joint ventures for setting up semiconductor fabs in India of any node (wafer size) against the old scheme where the incentives varied on the basis of wafer node size. Under this scheme, a fiscal incentive of 50% of the project cost can also be availed for setting up display fabs of specified technologies in India.

After Foxconn's announcement of exiting the JV, Minister of State for Electronics and Information Technology Rajeev Chandrasekhar said on Twitter that Foxconn's decision had "no impact" on India's plans, adding that both companies were "valued investors" in the country.

“It’s not for the government to get into why or how two private companies choose to partner or choose not to, but in simple terms but in simple terms it means both companies can & will now pursue their strategies in India independently, and with appropriate technology partners in Semicon n Electronics,” he added.

On the other hand, Union Minister of Electronics and IT Ashwini Vaishnaw said, “Both the companies Foxconn and Vedanta are committed to India’s semiconductor mission and Make in India program.”

While some experts said the move could raise eyebrows and doubts for other companies, most believe this is not a setback for India’s semiconductor mission.

“This is a temporary blip and could potentially delay Vedanta’s manufacturing project,” said Devroop Dhar, co-founder and managing director of Primus Partners, adding that another company, Micron Technology’s entry in India is a significant value add.