Foxconn pulls out of $19.5-billion chip plan with Vedanta, Govt asks it to set up independent unit

“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,” it said.

Last September, Vedanta and Foxconn had signed a memorandum of understanding with the Gujarat government to set up separate chip and display manufacturing plants in the state for an estimated $19.5 billion. The plant had triggered a political firestorm as Gujarat was picked over Maharashtra.

“We were aware that the joint venture between Vedanta and Foxconn was not going well, there were some differences and it became clear to us a few months ago that Foxconn wasgoing to pull out of it,” said a senior government official in Delhi, adding, “the government is in touch with Foxconn and is encouraging it to set up a fab independently.”

In Gujarat, a senior government official said: “The pull-out of Foxconn was being discussed for some time and it is on expected lines. There were disagreements with regard to technology, policy, priorities and leadership. However, they have not dropped their plan to set up a semiconductor unit in Gujarat. Only the joint venture with Vedanta has been called off”.

It is learnt that Vedanta’s heavy debt load had raised doubts about its ability to pay for manufacturing grade technology.

Foxconn, it is learnt, has hinted to the government that it could apply for India’s $10 billion dollar chip incentive scheme on its own, with technology from either STMicroelectronics or GlobalFoundries.

The government has maintained that Foxconn’s break-up with the joint venture will have no impact on India’s semiconductor fab plans. “It is not for the government to get into why or how two private companies choose to partner or choose not to, but in simple terms, it means both companies can and will now pursue their strategies in India independently,” Rajeev Chandrasekhar, Minister of State for Electronics and IT, said.

Last month, the Vedanta-Foxconn joint venture had reapplied for the chip incentive scheme, this time for a 40 nanometre (nm) process after its initial proposal to set up a 28 nm chip production plant failed to sign up a technology partner. Neither Foxconn nor Vedanta have the in-house technology to design and manufacture chips, and India’s scheme requires such entities to have a technology partner to plug that gap.

In a statement, Vedanta said that it has “lined up other partners to set up India’s first foundry”. “We will continue to grow our semiconductor team, and we have the licence for production-grade technology for 40 nm from a prominent Integrated Device Manufacturer (IDM). We will shortly acquire a licence for production-grade 28 nm as well,” the company said.

The government will evaluate Vedanta’s proposal. However, without Foxconn, the application is unlikely to move ahead, it is learnt.

Aside from Vedanta-Foxconn’s proposal, the Centre had received two other applications to set up a fab in India. However, both have faced difficulties, despite announcing manufacturing plants in the country.

ISMC, backed by Abu Dhabi-based Next Orbit and Israel’s Tower Semiconductor, has asked the Centre not to consider its proposal owing to a pending merger between Intel and Tower Semiconductor. The merger continues to be delayed more than a year after its first announcement.

The consortium had initially said that it would set up a $3 billion semiconductor fab in Karnataka. Their proposal, however, is not expected to move further until Intel’s merger with Tower is complete.

Singapore-based IGSS Venture’s proposal was not found to be up to the mark by the government’s advisory committee and, as a result, is on the backburner, it is learnt.

With inputs from Avinash Nair in Ahmedabad