Apple’s lead supplier and global manufacturing bedrock Foxconn, has rescinded out of a joint venture worth $19.5 billion with India’s metals-to-oil conglomerate Vedanta. The Vedanta Foxconn project was based on Indian Prime Minister Narendra Modi’s top priority plans for semiconductors made in India as a boost to the country’s economic strategy.

After signing a pact last year with Vedanta to set up semiconductor and display production plants in the Indian state of Gujarat, the electronics maker Foxconn has backed out. The Taiwanese Apple supplier’s decision to scrap the production schemes sent Vedanta’s shares falling more than 2 percent on Tuesday.

“Foxconn has determined it will not move forward on the joint venture with Vedanta.”

As per the statement, Foxconn has acknowledged but not elaborated on the reasons and implied a mutually consented deal breaker as the project was not moving fast enough. 

Foxconn Vedanta Project

(Image Courtesy – Shutterstock)

Foxconn Plant In India: Foxconn Vedanta Deal

Most of the world’s chip manufacturers are limited to only a few countries like Taiwan. In an endeavor to boost the economy, India is the latest entry in the sector predominated by selected countries. Best known for assembling iPhones and several other Apple products, Foxconn has recently expanded into chip-making in an attempt to diversify its business. 

When the Vedanta-Foxconn venture for chipmaking was announced in Gujarat in September 2022, Modi dubbed the project as an important step in the pursuit of a ‘new era’ in electronics manufacturing, fostering India’s ambitions for development.

Foxconn’s foray into India would’ve interested even other foreign investors to make chips in the Asian country for the first time. 

Foxconn and Vedanta’s partnership spanned more than a year to bring a great semiconductor idea to reality. But the mutual decision to break it off will now retain only Vedanta’s name in its entity. 

Vedanta’s investment in semiconductor tech ranged deep and had redoubled its effort to line up other partners to build India’s first foundry. 

Vedanta Foxconn Project: Obstacles

A few concerns regarding incentive approval delays by the Indian government have possibly contributed to Foxconn’s decision to back out of the joint venture. The influx of multiple questions regarding the cost estimates provided by the companies to obtain the incentives from the government could have also prompted this partnership break. 

“The deal falling through is a setback for the push for ‘Make in India’. It does not reflect well on Vedanta and raises eyebrows for other companies too.” 

Some more obstacles in the Foxconn-Vedanta project included the deadlocked talks with European chip maker STMicroelectronics for the sector of licensing technology. But for such a stake in the partnership, the Indian government wanted the European company to have more ‘skin in the game’. This rubbed STMicro the wrong way.

Yet, India remains confident in its staunch interest in attracting chipmaking investors

Last year, India received three applications to set up semiconductor plants under a $10 billion incentive scheme. The semiconductor market in India could be worth $63 billion by 2026. 

In another instance, last month, Micron announced plans to invest up to $825 million in a chip testing and packaging unit in India (mind you, not manufacturing). With the combined support from India’s federal government, the total investment will amount up to $2.75 billion.