Vedanta-Foxconn semiconductor JV: What it means for chip manufacturing in India?

Amid a global chip shortage, Anil Agarwal-led Vedanta and Taiwan’s Hon Hai Technology Group, also known as Foxconn, have entered into a partnership to manufacture semiconductors in India, a move that will significantly boost manufacturing of electronic goods in the country.

Vedanta will hold the majority stake in the joint venture and its chairman Anil Agarwal will head the JV, the memorandum of understanding between the two companies said. The Taiwan-based company would invest $118.7 million (Rs 899 crore) and hold 40 percent of the venture’s shares.

Vedanta is currently holding discussions with a few states to finalise the location of the chip manufacturing plant under the new joint venture.

Foxconn is the world’s largest contract electronics manufacturer and a major supplier to iPhone maker Apple. It has recently expanded into areas, including electric vehicles (EVs) and semiconductors.

Exports from China

The move to set up a joint venture between India and Taipei could spark fresh tensions with China, which claims the island country as its own. China is also one of the key exporters of semiconductors to India. In 2020, India spent $15 billion on electronics imports, of which 37 percent came from China, The Wire reported.

Demand for semiconductor chips is set to grow to around $100 billion by 2025, according to a Bloomberg report.
India and Taiwan have been in talks to bring in chip manufacturing to South Asia since September last year, Bloomberg had reported earlier. Officials of the two countries had discussed plans to bring in a chip plant to India. Back then, Taipei officials had sought tariff reductions on items used to make semiconductors under a bilateral investment agreement.

While India is looking to bring in technology investments into the country, Taiwan wants to strengthen its diplomatic presence among nations amid China’s attempts to unify the island democracy with its mainland.

India’s PLI scheme

In a bid to become more self-reliant in chips, the Centre launched a Rs 76,000-crore production-linked incentive (PLI) scheme for the sector in December last year. The initiative, which aims at creating a comprehensive ecosystem for chip design, packaging and manufacturing, is likely to attract investment of up to Rs 1.7 lakh crore in the next 5-6 years.

Manufacturers face trouble

Due to the global chip shortage, Mukesh Ambani’s Reliance Industries Ltd had to delay its much-anticipated launch of a smartphone in partnership with Google.