Vedanta Shares in Focus as Foxconn Withdraws from $19.5 Billion Joint Venture
Vedanta Ltd’s shares are expected to attract attention on Tuesday morning following the announcement that Foxconn is pulling out of their $19.5 billion joint venture aimed at semiconductor production in India. In response, Vedanta assured its commitment to the semiconductor fab project and revealed plans to collaborate with other partners to establish India’s first foundry.
Foxconn stated on Monday that it will no longer proceed with the joint venture and is working to remove its name from the fully-owned entity now controlled by Vedanta. In contrast, a spokesperson from Vedanta emphasized their dedication to expanding the Semiconductor team and securing necessary licenses for advanced production-grade technology.
Vedanta’s shares have experienced an 11% decline year-to-date, while the BSE Metal index has dropped by 1.58% during the same period.
This development follows Vedanta’s recent announcement that it would assume ownership of a joint venture with Foxconn, previously established for semiconductor manufacturing. The Vedanta board approved the acquisition of 100% ownership in Vedanta Foxconn Semiconductors Private Limited and Vedanta Displays, wholly owned subsidiaries of Twin Star Technologies Limited, through share transfer.
The Vedanta Foxconn JV recently resubmitted an application for the establishment of an electronic chip manufacturing plant under the modified semiconductor program. The government has enhanced fiscal incentives to 50% of the project cost for setting up semiconductor fabs and display fabs in India, encouraging the growth of domestic chip manufacturing.
The Vedanta JV’s primary focus was to produce chips starting at 40nm and later transitioning to 28nm, with a monthly capacity of 40,000 wafers. The investment for the display and semiconductor fabrication units was estimated at Rs1.54 lakh crore, with a 63:37 distribution.
According to a note from Morgan Stanley on July 3, the JV was actively seeking a third equity partner and exploring the potential for a partnership with STMicroelectronics as a technology collaborator. However, discussions reportedly hit a roadblock due to STMicro’s desire to limit technology transfer scope and establish a sunset clause of 5-10 years for the JV’s duration. STMicro also sought a higher investment contribution from the Vedanta group. Government approval mandates that applicants possess a fabrication unit for semiconductor chips (ranging from 65-28nm) or hold production-grade licensed technologies for 28nm chips.
In conclusion, while Foxconn’s withdrawal from the joint venture impacts Vedanta’s semiconductor ambitions, the company remains dedicated to realizing the Prime Minister’s vision for semiconductors in India. The search for alternative partners and continued efforts to reposition global semiconductor supply chains underscore Vedanta’s determination to contribute to the growth of this critical industry.