India's $19 billion chip project collapsed

Foxconn unexpectedly withdrew from its chip manufacturing alliance in India, making it increasingly difficult to enter the country's chip industry.

On July 10, Foxconn announced it was withdrawing from a $19.5 billion semiconductor joint venture with India's Vedanta Group. This move comes more than a year after the two sides decided to cooperate, from February 2022, to establish factories for manufacturing semiconductor components and displays in the state of Gujarat.

The joint venture was born in the context that India aims to participate in the global chip supply chain. Meanwhile, Foxconn, which is famous as an outsourcing unit for Apple, also wants to expand into new areas to diversify its business. Indian Prime Minister Narendra Modi has called this an important step in boosting the country's chip ambitions.

Foxconn did not specify the reason in its withdrawal statement, but said it had been working on the joint venture for more than a year to "turn a great semiconductor idea into reality".

According to Reuters sources , the cause may stem from disagreements between the two sides. Foxconn is not satisfied with the delay in approving government incentives, while India requires cost estimates from the joint venture to offer incentives.

Alternatively, the root cause may come from a third partner, the European chip maker STMicroelectronics. Vedanta - Foxconn joint venture promotes STMicro to license chip making technology, while India wants this company to participate more deeply in the game, even contributing shares in the joint venture. However, STMicro was not enthusiastic about this request and negotiations did not come to fruition.

Workers in a Foxconn production line. Photo: AFP

Recently, India has expressed its ambition to enter the semiconductor chip manufacturing market, with an expected value of 63 billion USD by 2026. Prime Minister Modi considers this a top priority in India's economic strategy. Degree aims to pursue the "new era" in electronic manufacturing. The country also launched a program to encourage semiconductor projects with a total value of 10 billion USD. However, Foxconn's move is considered a blow to the ambition to attract foreign investors in the first chip production here.

According to analyst Neil Shah from research firm Counterpoint, the joint venture's unsuccessful cooperation will be a major obstacle to the "Make in India" chip effort. "That doesn't create a good image of Vedanta and makes other partners wonder and doubt," said Shah.

Meanwhile, Vedanta confirmed to continue to pursue its commitment to its semiconductor project and already has partners "lined up" to set up the first foundry. The Ministry of Information Technology of this country said that the cooperation or not is a matter of the two companies, Foxconn's decision does not affect India's semiconductor plans. Last month, the country also reached an agreement with chip maker Micron, which is expected to invest $825 million to package and test chips in India.

In addition to the Vedanta - Foxconn deal, India's chip ambitions are also facing many obstacles. Another project stalled when its partner, IGSS Ventures, wanted to redo the registration process, while a project related to chip maker Tower Semiconductor was also stopped because the company was acquired by Intel earlier this year. .