India’s semiconductor fab goals on track despite Vedanta-Foxconn JV split

As India begins its long journey towards becoming a semiconductor hub, every effort counts, including the Vedanta-Foxconn joint venture (JV) that was called off recently. Experts say that contrary to the belief that the JV’s termination will adversely affect India’s semiconductor mission, it will not.

“India remains on the verge of establishing itself as a significant semiconductor hub, and ongoing supply chain realignments continue to drive its advantage. With a conducive policy environment in place, India will be on track to post progress,” says Prabhu Ram, Head of Industry Intelligence Group (IIG) at Cyber Media Research.

Unlike smartphone manufacturing, chip manufacturing is a complex, global affair involving over 25 countries, right from chip design to raw material, machines to packaging, and more. Given how complicated the industry is, even the US, which is the headquarters of leading chip companies—Intel, Global Foundries, Qualcomm, AMD, and NVIDIA, to name but a few—was outsourcing manufacturing for decades. It is only now that every country wants to bring chip manufacturing in-house, including India.

But given the pressure the India Semiconductor Mission (ISM) and the Ministry of Electronics and IT (MeitY) were under to approve the three applications—from International Semiconductor Consortium (ISMC), Vedanta-Foxconn joint venture, and IGSS Ventures—received for semiconductor fabs, it was good that the two didn’t act hastily. Instead, ISM and the government have been diligently scrutinising proposals.

The Tower Semiconductor consortium could have been the perfect start. But since Intel is acquiring Tower Semiconductor, MeitY wanted to wait for the acquisition to be complete as it feared that Intel would pull out of the project at a later stage. Also, Intel has no plans to set up a fab unit in India anytime soon. “Just over this last year, we have a lot of expansion that we called out in Germany, a greenfield expansion in Ohio [in the US], and brownfield expansion in Arizona [also in the US]. So, for the next few years, we are quite invested. But… we have looked at India in the past and will continue to look,” the outgoing Country Head of Intel India, Nivruti Rai, had told Business Today earlier.

Says Neil Shah, Vice President of Research at Counterpoint: “For the ISM to be successful, this could be a blessing in disguise to bet and vet the companies focusing more on those with core semi/fab expertise, technology, IP and a good pipeline of customers to be confident to scale by setting up shop in India.”

In June, the ISM even opened the second round of applications, where it invited applicants to submit afresh under mature nodes as well. And unlike in the past, when the window for submitting the applications was closed in just 45 days, the government has decided that no such timeline will be followed, and applications will be evaluated as and when they are received. This only reaffirms the government’s commitment to the semiconductor mission and ensures that no Indian or global company receives undue favour.

Even Rajeev Chandrasekhar, the Minister of State for MeitY, has brushed aside concerns of Foxconn’s exit affecting the scheme. “This decision of Foxconn to withdraw from its JV with Vedanta has no impact on India’s semiconductor fab goals. None. It was well known that both companies had no prior semicon experience or technology and were expected to source fab tech from a tech partner,” he tweeted. He further added, “While their JV VFSL had originally submitted a proposal for 28nm fab, they could not source appropriate tech partner for that proposal. Vedanta [through] VFSL has recently submitted a 40nm fab proposal backed by tech licensing agreement from a global semicon major—which is currently being evaluated by @Semicon_India Tech Advisory group.”

The minister’s tweet portends good tidings not just for Vedanta but also for India’s semiconductor dream. Vedanta might have to apply again to remove Foxconn’s name (and include a new partner when onboarded).