Vedanta and Foxconn to build $19.5bn chip plant in India’s Gujarat

Vedanta and Foxconn are to invest 1.54tn rupees ($19.5bn) in Prime Minister Narendra Modi’s home state of Gujarat to build one of India’s first semiconductor manufacturing complexes — part of a high-stakes, government-backed push to build domestic chipmaking capacity.

The Indian mining and industrial group and the Taiwanese contract manufacturer chose Gujarat over neighbouring Maharashtra, which was also vying for the business, for their joint venture. Vedanta’s chair Anil Agarwal said it would bring “India’s own Silicon Valley . . . a step closer now”. 

Under agreements signed between the companies and Gujarat’s government, they will set up an integrated semiconductor and display production complex aimed at feeding India’s burgeoning demand for microchips in the mobile phones, cars, computers and other devices it makes. Vedanta and Foxconn will hold 63 per cent and 37 per cent stakes respectively in the chipmaking venture, Agarwal said, and Vedanta will hold 100 per cent of the facility’s display glass production unit.

“India has enough demand for five to 10 such fabs, and we are going to mostly capture the local demand,” Vedanta’s chair told the Financial Times. “Total demand today in both semiconductor and glass is about $30bn-$35bn, and India is going to be in 10 years’ time a $350bn market.”

Agarwal said the complex would be operational by 2024, then take another six months to a year to reach full capacity. “This is the first factory, the largest investment,” he said.

In a statement, Foxconn said Gujarat had been “recognised for its industrial development, green energy and smart cities” as well as its “improving infrastructure” and government support for the venture.

The plant will be one of the first tangible results of India’s state-backed push into chipmaking. The Modi government in December approved a $10bn incentive plan intended to lure investors into microchip manufacturing and related concerns such as display glass.

IGSS Ventures, a Singaporean chipmaker, earlier this year signed a memorandum of understanding with the state of Tamil Nadu in southern India to build a wafer “fab”, for which it says it aims to sign binding agreements by the fourth quarter of this year, before launching production by early 2025.

ISMC, a joint venture between Israel’s Tower Semiconductor and Abu Dhabi-based Next Orbit Ventures, has signed a letter of intent with Karnataka, another southern state, to build a chipmaking plant there.

“It is PM Modi’s vision to establish India as a global manufacturing hub and a major player for semiconductor supply chains,” Gujarat’s government said in a statement announcing the deal.

However, sceptics about India’s imminent push into chipmaking have questioned whether the nascent industry will ever succeed in competing with incumbent makers of top-end chips in Taiwan, China, South Korea and elsewhere, at a time when the US, EU and others are also promoting their own industries. Some have argued that the government subsidies for chipmakers might be better put to use training local IT specialists, who could contribute to other parts of the value chain in which India’s lower labour costs give it an edge, such as semiconductor packaging or design.

Gujarat’s government said the joint venture would generate about 100,000 new jobs in the state. Agarwal said Gujarat had pledged subsidies on capital investment and power, along with 400 acres of land within an hour’s drive of the state’s largest city, Ahmedabad.