India’s Chip Dream- a setback?

India, a developing country, wanted to be a part of the $500 billion Semiconductor market. The recent divorce between Foxconn & Vedanta in a joint venture to build $19 billion Chip factory in India may shatter India’s ambitions for a while now.

The reasons can be plenty ranging from,

1. Geopolitical, as Foxconn is a Taiwanese company.
2. Economic, as the debt pile of Vedanta is huge.
   • ~$2.2 billion debt in this financial year starting 1 April 2023.
   • Total principal requirements of $1.3 billion.
   • Debt bond of ~1 billion, due in January 2024.

Let me dive into the sequence the events unfolding since INITIATION.

Vedanta, being a leading Natural resources conglomerate, and Foxconn, a major Electronics manufacturer, lagged a serious component in their alliance i.e., the technology to build chips.

Both the companies were expected to source Fab tech from a Technology partner as they did not have any prior experience on this field, for which European companies were foreseen.

Hard luck! The talks remained a deadlock and the deal fell apart. This is the reason cited as per reports.

HURDLES SINCE THE START!

1. The location was originally planned to be established in Maharashtra, which was later shifted to Gujarat, thanks to the incentives by the state.

2. Regulatory troubles made SEBI, to charge a penalty of $36000 on Vedanta last month, as the partnership in the joint venture between Foxconn & Vedanta was not disclosed in a right manner.

Thus, all did not go well between the two since the beginning and now, both wanted to part ways & work independently.

This does not mean that Foxconn is exiting India. They make Apple products and a new Assembly unit facility in the state of Tamil Nadu.

The country is bracing itself to migrate from Assembly unit to Manufacturing hub in the future. This requires Special Manufacturing schemes to concentrate on both domestic consumption and exports.

In the recent visit by PM Modi to the USA, India has cleared $2.7 billion worth Chip testing plant with US chipmaker ‘Micron’.

The present growth pace is low for India as the country could not attract big players. To accomplish the feat, India has to gradually move towards Manufacturing and Chip design and not just stick on with Assembly units.

Foxconn, in its statement has mentioned that, “Information system in India is porous”.

It is for the country to rectify the flaws and attract investments by offering incentives and business friendly policies to the companies and make India, ‘a Global Hub’ next to China in the days to come.