Last February, the leading supplier of Apple iPhones and an Indian metals conglomerate announced that they would work together to start making chips in India, building up to an ambitious plan for a multi-billion dollar chip plant in Gujarat, the home state of Indian Prime Minister Narendra Modi.
Over a year later, that plan may have been too ambitious for at least one partner.
Hon Hai Precision Industry, better known as Foxconn, said Monday that it was pulling out of its joint venture with Vedanta, its Indian partner. The Indian company would now take full ownership of the project.
“Foxconn has determined it will not move forward on the joint venture with Vedanta,” said the company in a statement.
The Apple supplier’s decision to abandon the project is another blow to the South Asian country’s plan to grow its own chipmaking industry, as the country’s government tries to encourage more companies to “Make in India.”
A $19.4 billion plan
The joint venture from Foxconn and Vedanta, announced in February 2022, was ambitious from the start. When the Gujarat project was announced in September, Modi suggested that the total investment would come to $19.4 billion, and Vedanta said the project could create 100,000 jobs. (Foxconn was more modest, only pledging a significantly more modest $119 million to the venture.)
Another way in which the plan was ambitious: Vedanta has no experience making chips, with much of its business focused on metals and hydrocarbons.
Both Foxconn and Vedanta hoped to tap into billions of dollars in government funds. In late 2021, India announced $10 billion in subsidies for local manufacturing of chips and displays. “The program will usher in a new era in electronics manufacturing,” the government said at the time.
More broadly, India hopes to take advantage of companies diversifying their supply chains away from China following its disruptive COVID policies and worsening tensions with the U.S. The South Asian nation also needs to provide more jobs for its working-age population, which will continue to swell in the coming years thanks to a “demographic dividend.”
Yet the Foxconn-Vedanta joint venture struggled to get government funding, as well as find a technology partner to provide the necessary chipmaking equipment. The delays over funding contributed to Foxconn’s decision to give up on the chip foundry, reports Reuters.
In a statement released Tuesday, Foxconn said that “recognition from both sides that the project was not moving fast enough” as well as “challenging gaps” led to a mutual agreement to part ways.
Make in India
Despite Foxconn’s withdrawal, both Vedanta and the Indian government are still confident that India can carve a niche for itself in semiconductor manufacturing.
“Vedanta has redoubled its efforts to fulfill the prime minister’s vision for semiconductors,” the company said in a statement. Vedanta said it’s already lined up new partners for the project.
And Indian junior tech minister Rajeev Chandrasekhar took to Twitter, saying that Foxconn’s decision “has no impact on India’s #Semiconductor Fab goals. None.” The Indian official continued that it was “a bad idea to bet against India under PM Modi.”
U.S. chip company Micron Technology recently agreed to invest up to $825 million in a chipmaking plant in Gujarat, covering 30% of the cost. (The national and state governments will cover the remaining 70% of the $2.75 billion facilities.)
On Tuesday, Foxconn said it was “committed” to India, including its “nascent semiconductor industry.” The Apple supplier is investing in India in other ways. The company already makes iPhones in the country, and plans to invest hundreds of millions of dollars in new factories throughout the country.
