Foxconn Scraps $19.5 Billion Investment Plan With Vedanta For Semiconductor Production

Foxconn, the Taiwanese multinational electronics contract manufacturer, has decided to scrap its $19.5 billion investment plan with Vedanta Limited, Reuters reported.

Foxconn, the largest manufacturer of contract electronics in the world and Vedanta agreed to establish semiconductor and display manufacturing facilities in Gujarat, Prime Minister Modi's home state, last year.

"Foxconn (2354.TW) has determined it will not move forward on the joint venture with Vedanta," the electronics maker said in a statement, without elaborating on the reasons.

Vedanta and Foxconn had been collaborating on "a great semiconductor idea" for more than a year, but they had mutually agreed to discontinue the joint venture, and Foxconn will have its name removed from what is now a totally owned Vedanta firm.

In order to usher in a "new era" in electronics manufacturing, Modi has prioritised chipmaking for India's economic plan, and Foxconn's decision is a setback to his hopes of recruiting international investors to produce chips locally for the first time.

Foxconn is best known for assembling iPhones and other goods made by Apple (AAPL.O), but in recent years it has been diversifying its business by introducing chip manufacturing.

As previously reported by Reuters, Vedanta-Foxconn's project was moving slowly due to a stalemate in their negotiations to include European chipmaker STMicroelectronics (STMPA.PA) as a partner, putting Modi's plan in jeopardy.

Vedanta-Foxconn had partnered with STMicro to secure technology licensing for their chip manufacturing venture. However, the Indian government expressed a desire for STMicro to have a more substantial involvement in the partnership, potentially through acquiring a stake.

STMicro was not inclined towards such an arrangement, leading to a stalemate in the negotiations, as stated by a source familiar with the matter.

India, recognizing the potential of its semiconductor market, with an estimated value of $63 billion by 2026, had introduced a $10 billion incentive scheme to attract investments in chip manufacturing.

These came from the Vedanta-Foxconn joint venture, the international ISMC consortium, which features Singapore-based IGSS Ventures as a technology partner, and from Vedanta-Foxconn.

The $3 billion ISMC project has also been put on hold as a result of Tower being acquired by Intel, and a second $3 billion IGSS proposal was also shelved because the company wished to reapply.