Vedanta-Foxconn JV told to give info on chip expertise

The Centre is “unsure” if the Vedanta-Foxconn joint venture has the “appropriate technical knowhow” for semiconductor manufacturing and fabrication, multiple sources aware of the government’s thinking told ET.

The ministry for electronics & information technology (MeitY) wants

and Foxconn Technology Group to provide more details on how they plan to acquire the required expertise, or get a third partner with demonstrated technical capability, according to the sources who declined to be identified.

“We are not very sure on how they (Vedanta-Foxconn) plan to achieve the scale that the government envisions. We want the companies to clarify on this,” said a senior government official, while noting that, “Foxconn has not really been involved in large-scale fabrication of semiconductor chips“.

Emails sent to Foxconn didn’t elicit a response till press time.

Replying to ET’s query on whether the government had sought more details or asked it to get a third partner, a Vedanta representative said “no such request” was made by the ministry.

Key Criteria

Companies need to demonstrate clear expertise in the specialised field of semiconductor manufacturing to qualify for incentives under India’s ambitious Rs 76,000 crore scheme aimed at creating a comprehensive semiconductor ecosystem, the sources pointed out.

“For the government, it is not about one company. It is a major plan and will have global repercussions. We cannot have any plans fail or turn up short in expectations at the last stage,” another official said.

To receive government approval to set up a semiconductor fabrication in India, companies should either own a fabrication unit for semiconductor chips in the 65-28 nanometre range or possess the “production-grade licensed technologies” to make 28 nm chips. They must also provide visibility into advanced node technologies through licensing or development, according to an official note on the requirements, which has been reviewed by ET.

Earlier in February, the government had said that it had received investment proposals worth Rs 1.53 lakh crore from several companies for semiconductor and display fabrication units.

With incentives of up to Rs 76,000 crore lined up for the companies, it could make up for half of the total investment made by the fab applicants.

In the same month, mining conglomerate Vedanta had inked a deal with Hon Hai Technology Group (“Foxconn”) to form a joint venture (JV) to manufacture semiconductors in India, under the programme for development of semiconductors and display manufacturing ecosystem. To date, Vedanta-Foxconn is the only applicant which is still scouting for a factory location.

Meanwhile, other applicants like Israeli technology major Tower’s joint venture with Dubai’s NextOrbit – ISMC Analog – has sealed Mysuru as its manufacturing location. Singapore’s IGSS Ventures is expected to pick a location in Tamil Nadu.

Technology partnership

Industry executives aware of the deliberations going on at the IT ministry said though Foxconn has prowess in electronics system manufacturing, its entry into semiconductor manufacturing is a “backward integration”, which it would need to execute with a technology partner.

“One cannot guess when the technology partner would be onboarded, but I would say that is the way they will go about it, with Vedanta-Foxconn being the investment partner and executed through a tech partner,” an executive said, asking not to be named.

According to the MoU signed between the two companies, Vedanta will hold majority equity stake in the JV, while Foxconn will be the minority shareholder. Vedanta chairman Anil Agarwal is slated to be the chairman of the joint venture company.

ET had earlier reported that Vedanta plans to invest up to Rs 66,000 crore in the semiconductor chip manufacturing plant. The company had then said that it would target smartphones and electronics with the 28-nanometre (nm) fabrication.

Perfect Partner

Akarsh Hebbar, global managing director of Vedanta Group’s display and semiconductor business, had in February told ET despite having no prior experience in semiconductor manufacturing, Foxconn was the perfect partner owing to its global footprint in electronics manufacturing.

In April, Hebbar repeated his stance on the JV and said Foxconn would be able to marshal the required technology and resources.