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Can Vedanta pull off its semiconductor project without Foxconn?
As the Anil Agarwal-led company waits for a clearance from the Indian government on its ambitious semiconductor project, Foxconn has pulled the plug on their $19.5 billion joint venture
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It was meant to be the stuff of dreams. Now it seems to have gone sour.
On July 10, the Hon Hai Technology Group, popularly known as Foxconn said that it has decided not to move forward on joint venture with Vedanta to manufacture semiconductor chips in India.
“For over a year Hon Hai Technology Group (Foxconn) and Vedanta have worked hard to bring a great semiconductor idea to reality,” Foxconn said in a statement. “It has been a fruitful experience that can position both companies strongly going forward. In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta.”
The announcement further throws the joint venture project into a jeopardy especially since the Indian government is yet to give clearance to the project to set up a semiconductor plant in India. Foxconn and Vedanta had signed a pact last year to invest $19.5 billion to set up the semiconductor plant in the country.
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On its part, Vedanta seems unfazed by the development, and is in turn scouting for more partners. "Vedanta reiterates that it is fully committed to its semiconductor fab project and we have lined up other partners to set up India’s first foundry. 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. Vedanta has redoubled its efforts to fulfill the Prime Minister's vision for semiconductors and India remains pivotal in repositioning global semiconductor supply chains," a spokesperson from Vedanta said.
Semiconductors are critical components in consumer electronics. In vehicles, for instance, they are the mainstay of control and entertainment systems, and domestic automakers have faced severe production delays in the past few years.
“Foxconn is confident about the direction of India’s semiconductor development,” a statement from Foxconn said. “We will continue to strongly support the government’s “Make In India” ambitions and establish a diversity of local partnerships that meet the needs of stakeholders.”
In an interview with Forbes India in May this year, Anil Agarwal, the chairman of Vedanta and Akarsh Hebbar, his son-in-law and the global managing director of display and semiconductors at Vedanta had outlined how the partnership with Foxconn was a natural one, and was struck in short notice as soon as the Narendra Modi government announced the semiconductor plan.
The partnership, a first-of-its-kind in India, was stitched on mutual trust, and a strong belief by Foxconn that Vedanta is swift with their act, Agarwal had told Forbes India. “There cannot be two drivers on a car,” Agarwal said. “Young Liu, (Foxconn’s chairman) suggested that, because you are the son of the soil, you drive the car, and we'll sit by the side. They will take full responsibility on the technology side.”
“We realised very early on that what Vedanta has, Foxconn doesn't, and what Foxconn has, Vedanta doesn't,” Hebbar had also said. “We have different revenues and different business streams. The forte that we have in manufacturing and business in India and the forte that they have in the technology ecosystem are complementary to each other.”
Foxconn, Vedanta had said, was fully responsible for the operations and sales, and also the entire technology of the project. Foxconn had also roped in a technology partner, according to Vedanta, with a production-grade licence and expertise in manufacturing, as per government requirements.
Since then, the project has been stuck in a limbo even as the Indian government announced a deal that will see US-based Micron Technology set up a $2.75-billion semiconductor testing and assembly facility in India, the first of its kind in the country. The move also marked the first approval under the government’s $10-billion incentive plan to encourage chip manufacturing.
On July 7, Vedanta said that that it would take over from its holding company the ownership of the joint venture, Vedanta Foxconn Semiconductors Private Limited, which was a wholly owned subsidiary of Vedanta group entity Twin Star Technologies Limited.
“Foxconn is working to remove the Foxconn name from what now is a fully-owned entity of Vedanta,” Foxconn said in the statement. “Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future stakeholders.”
The joint venture semiconductor fab foundry was to manufacture 40,000 wafers per month to cater to mobiles, consumer electronics, automotives, and network equipment. “Eighty to 85 percent of the 40 nm process is used in the 28 nm process,” Hebbar had told Forbes India. “Foxconn is an expert in this. They are not just the technology transfer company or assembly and test company. They're an industry transfer company. They will also bring the entire industry with them. They've done that in China, they're going to do it in India.”
For now, it seems as though, Vedanta will have to set the ball rolling alone, without Foxconn’s might, if it dreams of making its semiconductor dreams a reality.
