Foxconn’s development raises doubts about loopholes in government incentive policies
Post Date – 12:30 AM, Thursday – July 23rd 13th
Although Foxconn is the frontrunner in India’s semiconductor manufacturing incentive scheme, it withdrew from a joint venture with Vedanta Group, dashing India’s rapid rise as a global chip manufacturing hub. Under the $19.5 billion joint venture plan announced last year, the two companies should jointly invest in a manufacturing plant in Gujarat state to produce 28-nanometer semiconductors. The development has raised questions about loopholes in the government’s incentive policy ostensibly aimed at boosting the country’s semiconductor manufacturing facilities to reduce its current reliance on China. A cloud of uncertainty hangs over the joint venture after reports that the two companies were unable to meet government demands for more technology transfer and investment from European firm STMicroelectronics. While Vedanta-Foxconn managed to get STMicroelectronics to license the technology, the central government made it clear that it wanted more “interested participation” from the European company, such as a stake in the partnership. The anti-climax also highlights how the short 45-day window the center offers for incentive programs forces applicants to make hasty decisions. It must be noted that neither company has prior semiconductor experience or technology and is expected to acquire technology from a partner. Taiwan-based Foxconn is best known for assembling iPhones and other Apple products, but in recent years the company has been expanding into chips to diversify its business. The failure of the Foxconn-Vedanta deal is undoubtedly a setback for the “Make in India” process.
Prime Minister Narendra Modi has made chips a top priority of India’s economic strategy in pursuit of a new era of electronics manufacturing, and Foxconn’s latest move deals a blow to its ambitions to attract foreign investors to manufacture chips locally for the first time . Most of the world’s chip production is limited to a handful of countries such as Taiwan and China, with India a latecomer. The Indian semiconductor market is expected to reach $63 billion by 2026. Under the $10 billion incentive package, three applications were received last year: the Vedanta-Foxconn joint venture, Singapore-based IGSS Ventures and ISMC Partners, a global consortium that counts Tower Semiconductor as a technology company. Since Tower was acquired by Intel, the $3 billion ISMC project has also stalled, and another $3 billion plan by IGSS has also been stopped because it wanted to resubmit the application. India has re-invited applications for the incentive scheme with a new window that opened on June 1 and will run until December 2024. This response is critical to the development of the semiconductor industry. Manufacturing semiconductors domestically is important to India’s vision of becoming an electronics manufacturing hub and ultimately reducing imports from foreign countries especially China, which remains the industry’s number one destination.
