In a setback to Prime Minister Narendra Modi’s chip-making plans for India, Foxconn on Monday said it had withdrawn from a $19.5 billion semiconductor joint venture with Indian conglomerate Vedanta. Last year, the project was at the centre of a political firestorm between Maharashtra and Gujarat, with the project scheduled for the former ending up tying up with the latter.
In February 2022, Foxconn partnered with Vedanta to make semiconductors in India in a bid to diversify its business. Foxconn said it would be “a significant boost to domestic manufacturing of electronics in India”. In the last week of July that year, a Foxconn delegation met Maharashtra Chief Minister Eknath Shinde and his deputy Devendra Fadnavis. Following the meeting, the Maharashtra Industrial Development Corporation issued a press note that read, “Vedanta is in active discussion with the government of Maharashtra for their proposed manufacturing facility for semiconductors and display fabs. With a high concentration of skilled manpower, connectivity to the port, seamless domestic supply chain and highly developed industrial infrastructure, Talegaon in Pune has emerged as a prominent option for Vedanta and Foxconn for their $22 billion investment that can generate more than 200,000 direct and indirect jobs.”
The note further said that Vedanta and Foxconn had multiple rounds of meetings with the state leadership and Vedanta visited Talegaon and found the location to be an ideal match for their requirements. This was a significant move for the Shinde-Fadnavis government that had come to power the same month after a group of rebel MLAs led by Shinde launched a revolt against his predecessor Uddhav Thackeray and split the Shiv Sena.
At the time, Shinde said in a statement that Vedanta, along with Foxconn, could play “a pivotal role as the anchor investor in creating the next Silicon Valley”. Fadnavis said Maharashtra was a “natural choice” for the manufacturing plant.
The project was seen as a win-win for the Shinde government. It was estimated to bring close to Rs 26,200 crore SGST, generate 80,000 to 1,00,000 direct and indirect job opportunities, and $21-billion direct investment and $5-8 billion additional investment, helping the state’s GDP growth. Around 150-plus companies across the value chain would have benefited, creating 70,000 to 1,00,000 direct and indirect jobs.
But on September 13, 2022, Vedanta and Foxconn moved the project to Gujarat, signing a pact to invest $19.5 billion to set up the semiconductor and display production plant. Modi called the MoU “an important step accelerating India’s semiconductor manufacturing ambitions”. He added, “The investment of Rs 1.54 lakh crore will create a significant impact to boost the economy and jobs. This will also create a huge ecosystem for ancillary industries and help our MSMEs.”
According to sources within the Maharashtra Industries department, the reason for the move to Gujarat was the more lucrative offer of land-related incentives.
The Maha Vikas Aghadi (MVA), by then in the Opposition in Maharashtra, claimed that the state government surrendered to Modi to assist the BJP’s electoral efforts in Gujarat, which was set to go to polls later that year. The Vedanta-Foxconn MoU with Gujarat left Maharashtra officials stunned and the Opposition slammed the Eknath Shinde government over the “missed” opportunity.
Officials said capital subsidy of up to 30% had been offered, among other incentives, to set up the plant in the Talegaon industrial area near Pune. According to officials involved in the negotiations, higher incentives by Gujarat were the reason why the company was negotiating for more incentives regarding land for the project.
In a Twitter post, Shiv Sena (UBT) leader Aadithya Thackeray accused the new dispensation in the state of “lacking commitment” to bring the plant to Maharashtra. “For a project almost finalised, and a new dispensation claiming credit over it, only shows lack of commitment from the new dispensation for our state’s progress,” he tweeted.
Shiv Sena leader Subhash Desai, who was the industries minister in the Uddhav Thackeray-led MVA government, said Gujarat was nowhere in the picture when discussions about the project were on. MVA also questioned the failure to keep the project in Maharashtra. Nationalist Congress Party (NCP) MLA Rohit Pawar wondered, “Why should Maharashtra youths pay the price? What was Maharashtra’s right has been forcibly taken away by Gujarat for polls?”
State Congress president Nana Patole said, “Modi and Shah have a design to break Mumbai from Maharashtra. But now it is evident they want to take away each and every right from Maharashtra.”
But even then the project seemed to remain stalled. On May 19, Union Minister of State for Electronics and Information Technology Rajeev Chandrasekhar tells Reuters that the joint venture (JV) was struggling to tie up with a technology partner. On May 31, Reuters reported that Vedanta-Foxconn JV was proceeding slowly as talks to involve STMicroelectronics are deadlocked. Vedanta-Foxconn had got on board STMicro for licensing technology, but the Union government made clear it wants the European chipmaker to have “more skin in the game”, such as a stake in the partnership, a source with direct knowledge of the matter said. On June 30, market regulator SEBI fined Vedanta for breaching disclosure rules by publishing a press release that made it appear it had partnered with Foxconn to make semiconductors in India, as the deal was with Vedanta’s holding company.
On Monday, Foxconn dropped out of the joint venture without specifying a reason. “Foxconn has determined it will not move forward on the joint venture with Vedanta,” it said.
(With inputs from Reuters)