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Foxconn pulls out of $19.5 billion India factory deal

By Nithya Bose in Business News, posted July 11, 2023

Apple supplier Foxconn has backed out of a $19.5 billion deal with Indian mining giant Vedanta to establish a chip-making plant in Gujarat.

The withdrawal, less than a year after the plans were announced, is seen as a setback for India's technology industry ambitions.

While some analysts view the decision as a blow to India's semiconductor goals, a government minister insists it will not impact the country's chip-making aspirations.

Taiwan-based Foxconn said both sides recognized the project's slow progress and the existence of challenging gaps that couldn't be overcome smoothly.

External issues unrelated to the venture were also cited.

The firm said the decision was made through a mutual agreement with Vedanta, which now holds full ownership of the venture.

The company continued supporting India's "Make in India" campaign.

Based in New Delhi, Vedanta has lined up other partners to establish India's first chip foundry.

Paul Triolo from Albright Stonebridge Group said: "The surprise pull-out of Foxconn is a considerable blow to India's semiconductor ambitions.

"The apparent cause of the pull-out is the lack of a clear technology partner and path for the joint venture.

"Neither party had significant experience with developing and managing a large-scale semiconductor manufacturing operation."

India's Minister of State for Electronics and Information Technology, Rajeev Chandrasekhar, tweeted Foxconn's decision will have "no impact on India's semiconductor fab[rication] goals. None."

He referred to Foxconn and Vedanta as valued investors in the country who will now pursue their strategies independently.

The Indian government has been actively working on strategies to support the chipmaking industry and reduce reliance on foreign chipmakers.

Last year, a $10bn fund was created to attract more investors to the sector.

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Prime Minister Modi's "Make in India" initiative, launched in 2014, aims to transform India into a global manufacturing hub to compete with China.

Other companies have announced plans to build semiconductor factories in India despite the setback.

Last month, US memory chip giant Micron announced plans to invest up to $825m in constructing a semiconductor assembly and test facility in Gujarat.

The project, set to commence construction this year, is expected to generate 5,000 direct jobs and an additional 15,000 jobs in the area.

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