Foxconn pulls out from $19.5bn India chip factory project

The lead Apple supplier has revealed it will not go ahead with the $19.5bn (£15.2bn) deal agreed with Vedanta to build a semiconductor manufacturing factory in the Indian state of Gujarat.

The news has been announced less than a year after the two companies announced the project, and it constitutes a significant blow to Prime Minister Narendra Modi’s ambitions to transform India into a tech manufacturing powerhouse.

“There was recognition from both sides that the project was not moving fast enough,” Foxconn said in a statement. “There were challenging gaps we were not able to smoothly overcome, as well as external issues unrelated to the project.”

The company also criticised media reports that portrayed the decision as “a negative example of the Group’s investment integrity” and stressed that “that is not the case”. 

In response, Vedanta said it is fully committed to its semiconductor project and had “lined up other partners to set up India’s first foundry”.

“Vedanta has redoubled its efforts” to fulfil Modi’s vision, it added in a statement.

The joint factory project with Vedanta was not the only investment of its kind that Foxconn has made in India. The company has already broken ground on multiple factory sites across the country including in Tengalana and Bengaluru, although none as large as the Gujarat one. 

Rajeev Chandrasekhar, India’s Minister of State for Electronics and Information Technology, added in a tweet that Foxconn’s decision had “no impact on India’s semiconductor fab[rication] goals. None.”

Although the Indian government has not taken a side in the “chips war” between Washington and Beijing, since 2014 the Modi administration has been looking to support the domestic manufacturing of electronic equipment. 

In 2022, the country created a $10bn (£7.7bn) fund to attract more investors to the sector, in a bid to become less reliant on foreign chipmakers. 

Last month, US memory chip giant Micron said it would invest up to $825m (£639m) to build a semiconductor assembly and test facility in the Indian state of Gujarat. The project is expected to directly create up to 5,000 roles and another 15,000 jobs in the area.

Although the global chip shortage that hit the world in 2020 has begun to ease, US officials have warned that it is likely to continue to some degree through the rest of 2023.

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