Days after Vedanta Foxconn Semiconductors resubmitted its application for setting up a 40 nanometer (nm) fabrication unit proposal to the India Semiconductor Mission, Taiwan-based Foxconn decided to exit the joint venture. Vedanta is now scouting for a new partner, but if it does not onboard one, it may have to run solo. But it would still require a production-grade technology partner as that is one of the prerequisites for project approval and qualifying for the incentive. With Foxconn out, this partner should be willing to hand-hold Vedanta in its semiconductor journey.
Following yesterday’s developments, Satya Gupta, President – of VLSI Society, told Business Today, “Vedanta will submit their application solo. Their main problem now will be who will the customer for their wafers. They have to address this problem.”
Gupta raises a valid question, as Anil Agarwal-led metal conglomerate Vedanta does not have any expertise in semiconductors or electronics. Building a semiconductor fabrication facility, or fab, is a significant investment, and for it to be profitable, it needs to operate at a capacity of over 90 per cent and have orders to meet the demand. Unfortunately, Vedanta lacks the necessary expertise in this area.
In this context, Foxconn could have played a crucial role. It has established close partnerships with leading technology hardware giants around the world and possesses extensive experience in electronics manufacturing. With its strong connections, Foxconn would have been well-positioned to secure orders for the semiconductors produced at the unit.
Additionally, Foxconn has multiple manufacturing plants in India that further strengthen its presence and capabilities here. Partnering with a company like Foxconn would have ensured a customer base for the wafers produced at the semiconductor plant.
However, the same partnership could have been the reason for the delay in obtaining a production-grade licence for silicon fabs.
Foxconn exit, a blessing for Vedanta?
Vedanta’s joint venture with Foxconn could have been a reason for the delay in onboarding a technology partner for a production-grade licence, the reason being that Foxconn is an electronics assembly player that manufactures for leaders such as Apple and Xiaomi. Foxconn getting into semiconductors could have been a threat to a possible technology partner like STMicrotechnology. “An assembly company suddenly doing vertical integration and getting into chip manufacturing can be a threat to any significant company,” explains independent analyst Arun Mampazhy.
Earlier this year, the Vedanta-Foxconn JV was in advanced discussions with Europe-based STMicroelectronics to induct the latter as a technology partner. As STMicroelectronics would not have been a leading partner in the JV, sources at the Ministry of Electronics and IT (MEITY) had told Business Today that the ministry was worried about the company’s commitment to the JV. This is why MeitY wanted STMicroelectronics to have more skin in the game. With Foxconn’s exit, STMicroelectronics might look at this project more seriously. But only if Vedanta has access to the technology partner, for which the onus was earlier on Foxconn.
Also, whosoever the technology partner may be, Vedanta will need handholding because technology transfer involves thousands of steps and scaling yield. “Just because they get the technology transfer, it doesn’t mean that they can directly use it. If it involves implementing new tools, then there will be a need for tool matching or tweaking. And even if there is the transfer of production technology, yield can only be scaled to 90-100% slowly, not from day one,” adds Mampazhy.
All these details are currently under wraps and will be disclosed in the coming days. But Foxconn’s exit from the JV might turn out to be a blessing for Vedanta as it looks to onboard a technology partner and in getting approvals for its semiconductor fab proposal.