Why did Foxconn dump $19.5 billion semiconductor project with Vedanta in Gujarat?

The joint venture between Taiwan's Foxconn (Hon Hai Technology Group) and India's Vedanta was supposed to usher in a new era of "Made in India" technology manufacturing, with the country's first chipmaking plant. However, just a year after the announcements were made, Foxconn abandoned the $19.5 billion semiconductor JV.  

Foxconn said it is working to remove its name from what is now a fully-owned entity of Vedanta. 

What does it mean for the semiconductor plant? 

So far, Vedanta is still invested in the vision of creating India's first semiconductor plant. 

• On the other hand, while several reports stated that Foxconn's withdrawal has resulted in a setback for Prime Minister Narendra Modi's chipmaking plans for India, the Central government clarified that it has no such impact. 
• Responding to the opposition's rebuttal to the BJP government over the JV cancellation, MoS IT Rajeev Chandrasekhar said that calling the development a "blow" to India's semiconductor ambitions is a "bad idea to bet against India under PM Modi".

Cong spinmaster out with no guns blazing ...😂

➡️Withdrawal of Foxconn from its JV with Vedanta changes nothing about Indias Semicon goals. Not a thing.

➡️It allows both companies to independently pursue their strategies for Indian Semicon n Electronics. To quote Foxconn… https://t.co/XmnHAprs8O

— Rajeev Chandrasekhar 🇮🇳 (@Rajeev_GoI) July 10, 2023

• Chandrasekhar also added that it was not for the government to get into "why or how two private companies choose to partner or choose not to". 

➡️This decision of Foxconn to withdraw from its JV wth Vedanta has no impact on India's #Semiconductor Fab goals. None.

➡️Both Foxconn n Vedanta have significant investments in India and are valued investors who are creating jobs n growth.

➡️It was well known that both… https://t.co/0DQrwXeCIr

— Rajeev Chandrasekhar 🇮🇳 (@Rajeev_GoI) July 10, 2023

• The semiconductor plant was initially supposed to be set up in Maharashtra but was later shifted to Gujarat after much political furor ahead of assembly elections in the state. 
• The project had also made it in election sloganeering as the incumbent government promised it would bring over one lakh jobs to the state. 

Both the companies Foxconn and Vedanta are committed to India’s semiconductor mission and Make in India program.

— Ashwini Vaishnaw (@AshwiniVaishnaw) July 10, 2023

Why did Foxconn withdraw from the JV?

• Foxconn has so far not elaborated on its reasons for abandoning the project. However, for both Vedanta and Foxconn, the Gujarat project would have been their very first semiconductor project ever. 
• Neither Foxconn, nor Vedanta are experienced players when it comes to semiconductor manufacturing. 
• Foxconn, known for its iPhone production, wanted to diversify its business and hence jumped into the venture. 
• According to sources quoted by Reuters, Foxconn decided to pull out after India raised questions over its application for an incentive scheme for chip production.
• Incentive approval delays by the government also reportedly contributed to Foxconn's decision. 
• The government has set up a $10 billion incentive plan to encourage chip manufacturing. US-based Micron Technology is the first company that got approval under the incentive scheme. 

So Foxconn-Vedanta is off. But Micron still seems to be on for semiconductor chip assembly, packaging and testing. Micron though is putting up just 30% of the $2.75 billion with 50% coming from the Centre and 20% from the Gujarat Govt. By any standards this appears to be a hugely…

— Jairam Ramesh (@Jairam_Ramesh) July 10, 2023

• Among other problems for the JV was finding a suitable tech partner with experience. Foxconn and Vedanta had brought on board European company STMicro for licensing technology, but the Indian government made it clear it wanted the company to have more "skin in the game". 

Semiconductors are crucial components required for consumer electronics including automakers. 

[ALSO READ: 20 crore Made In India iPhones to be manufactured at Foxconn Karnataka plant each year]