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Foxconn, Apple Supplier, Withdraws From $20 Billion India Chip Factory

Neil Campbell
Neil lives in Canada and writes about society and politics.
Published: July 12, 2023
Foxconn withdraws from a $20 billion joint venture to make chips in India.
A file photo of a Foxconn sign in India in December of 2021. The company, based in Taiwan but produces Apple products in Mainland China, pulled out of a $20 billion joint venture to build a semiconductor factory in India. (Image: ARUN SANKAR/AFP via Getty Images)

Taiwan-based Foxconn, most widely known for assembling iPhones and other Apple products at factories in mainland China, has withdrawn from a $20 billion joint venture with India’s Vedanta to build a semiconductor plant in Prime Minister Narendra Modi’s home state.

Foxconn made the announcement in a press release on July 11, where they said “Both parties mutually agreed to part ways. This is not a negative,” citing a lack of speed in the transaction and “challenging gaps” that neither party could overcome.

South China Morning Post reported on the move that Vedanta and Foxconn had sought to make 40-nanometer chips for usage in phones, consumer electronics, and automobiles, a step back from ambitions to build a 28-nanometer fab, which failed because “the two could not source an appropriate tech partner,” the outlet said.

A semiconductor analyst involved in India told the outlet that “there has to be either a partnership with or a production-grade license from a high-volume chip fab” to qualify for government subsidies.

Foxconn does not qualify as either.

The departure raises an eyebrow in light of moves by Apple in April to offload an additional 6 percent of its worldwide iPhone production to India from China’s factories.

BBC reported that Vedanta said it had “lined up other partners to set up India’s first [chip] foundry.”

Recent international policy moves from the West and its allies have revolved around a narrative of “de-risking” but not “decoupling” from mainland China.

In June, Foxconn CEO Young Liu told BBC that his company was moving away from iPhone production and towards the electric vehicle craze, specifically citing tensions between the Biden administration and Beijing as the cause.

“We hope peace and stability will be something the leaders of these two countries will keep in mind,” Liu said, adding, “But as a business, as a CEO, I have to think about what if the worst case happens?”

Liu said that some “national security products,” which BBC surmised as being “servers Foxconn makes that are used in data centres, and can contain sensitive information” were already being offshored from China to Mexico and Vietnam.

BBC added, “But the West and its allies have called for countries and companies to ‘de-risk’ from China – a long-term shift to curb global reliance on China that is yet to play out”

When Liu was asked about this point, he stated in regard to “some overseas clients” that, “They get the push from their government about de-risking, and then they will let us know.”

In May, Broadcom, one of the hottest stocks on the U.S. equities market at the moment, announced it would begin making 5G parts it supplied to Apple at its facility in Colorado instead of its Chinese factories.

Yet, at least in the case of Vedanta and Foxconn, the issue may have come down simply to financial stability.

A July 11 Reuters report paraphrased a “source familiar with the matter” as saying the cause was really “concerns about incentive approval delays by India’s government” that had “aided” Foxconn’s decision to veto the venture.

The article noted that, “Vedanta Resources has been plagued by a rising debt pile. Credit ratings agency Moody’s downgraded its rating on the company, while others raised concern about risks of a debt default.” 

Reuters added that the company is also not popular with India-based activists after a 2018 disaster at a copper mine killed 13 people.

Case in point: SCMP reported on July 11 that Foxconn announced it intends to deploy in India and receive government subsidies without Vedanta.

“Building fabs from scratch in a new geography is a challenge, but Foxconn is committed to investing in India,” the company said in a statement.

The push to move into India and not China expands to other companies. Memory chip maker Micron announced at the end of June that it would devote $825 million in a $2.75 billion venture between itself and India’s federal government and the state of Gujarat to build a semiconductor facility, Reuters reported.

The announcement came just days after the company notified investors that the Cybersecurity Administration of China was cracking down on Micron products.

The Register cited an SEC filing from the company, which stated, “Several Micron customers, including mobile OEMs, are being contacted by certain Critical Information Infrastructure operators or representatives of the government in China concerning the future use of Micron products.”

At the end of June, the Biden administration leaked plans to The Wall Street Journal that it intends to fully ban sales of chips made by NVIDIA commonly used for artificial intelligence deep learning and machine learning to mainland Chinese entities.

Just days later in an apparent tit-for-tat, Beijing placed export controls on two rare earth minerals, gallium and germanium, starting Aug. 1 that will require permission from the Chinese Communist Party to export outside of China.