BEFORE READING THE ARTICLE “VEDANTA AND FOXCONN SEMICONDUCTOR DEAL”
VEDANTA LTD IS AN INDIAN MULTINATIONAL MINING COMPANY WITH ITS MAIN OPERATIONS IN IRON ORE, GOLD AND ALUMINIUM MINES IN 4 DIFFERENT STATES IN INDIA. IT IS A SUBSIDERY OF VEDANTA RESOURCE.
AREA SERVED: INDIA, AFRICA, IRELAND, AUSTRALIA.
PRODUCTS: ALUMINIUM, ZINC, IRON ORE, NIKEL, OIL AND GASES
FOXCONN: HON HAI PRECISION INDUSTRY CO., LTD IN CHINA AND INTERNATIONALLY KNOWN AS FOXCONN IS A TAIWANESE MULTINATIONAL ELECTRONICS CONTRACT MANUFACTURER. BEING WORLD LARGEST TECHNOLOGY MANUFACTURER AND SERVICE PROVIDER, IT HAS ANNUAL REVENUE OF $175 BILLION AND IT WAS RANKED 20TH IN THE 2022 FORTUNE GLOBAL 500.
AREA SERVED: NORTH AMERICA, ASIA, EUROPE
PRODUCTS: BLACKBERRY, IPAD, IPHONE, IPOD, KINDLE, NINTENDO, PLAYSTATION, XBOX, NOKIA.
SEMICONDUCTOR: SEMICONDUCTORS ARE MATERIALS WHICH HAVE A CONDUCTIVITY BETWEEN CONDUCTORS (METALS) & NONCONDUCTORS (INSULATORS). IT IS GENERALLY USED IN ELECTRONIC DEVICES.
CHIPS: IT IS A TINY WAFER OF SEMICONDUCTING MATERIAL WITH EMBEDDED ELECTRONIC CIRCUIT AND USED TO TRANSMIT DATA SIGNALS IN COMPUTERS, PHONES, HOUSEHOLD ALLIANCES AND MORE.
MOSTLY ALL ELECTRONIC DEVICES (INCLUDING LAPTOPS, PHONES, CARS ETC) CONTAIN CHIP IN THEM. DURING LOCKDOWN, THERE WAS A HUGE SHORTAGE OF CHIPS IN INDIA. THERE WAS A LARGE DEMAND OF ELECTRONIC DEVICES BUT MAKING OF CHIP WAS NOT THAT FAST IN COMPARISION WITH DEMAND FOR ELECTRONICS.
THIS WAS A PERFECT OPPORTUNITY FOR INDIA TO INSTALL SUCH A LARGE PLANT OF SEMICONDUCTORS.
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TIMELINE OF THE VEDANTA AND FOXCONN SEMICONDUCTOR DEAL
ON 14 FEBRUARY 2022, FOXCONN PARTNERS WITH VEDANTA TO MAKE 28 NANOMETERS SEMICONDUCTORS CHIP IN INDIA IN A BID TO DIVERSIFY ITS BUSINESS.
ON 13 SEPTEMBER 2022 VEDANTA LTD AND FOXCONN SIGNED AN AGREEMENT ON TUESDAY WITH GUJARAT (PRIME MINISTER NARENDRA MODI’S HOME STATE), TO SET UP A $20 BILLION SEMICONDUCTOR PROJECT (PLANT).
ANIL AGGARWAL (CHAIRMAN OF VEDADNTA) ANNOUNCED THAT “THERE WILL BE NO PROBLEM IN FUNDING OF THE PROJECT” EVEN THOUGH VEDANTA WAS IN SOO MUCH OF DEBT.
VEDANTA DOESN’T HAD THE TECHNOLOGY TO MAKE THESE CHIP. THEY NEEDED TO PARTNER WITH ANOTHER COMPANY BUT THEY WERE UNABLE TO FIND ONE.
IT WAS LATER IN MAY, IT WAS FOUND OUT THAT VEDANTA IS STRUGGLING TO TIE UP WITH A TECHNOLOGICAL PARTNER. IT PROCEEDS SLOWLY AS TALKS TO INVOLVE STMICROELECTRONICS (FOR LICENSING TECHNOLOGY) ARE DEADLOCKED.
ON 30 JUNE 2023: SEBI HAS FINED VEDANTA LTD RS.30 LAKH FOR (ALLEGEDLY MISLEADING MARKET) BREACHING DISCLOUSURE RULES BY PUBLISHING A PRESS RELEASE THAT MADE IT APPEAR IT HAD PARTNER WITH FOXCONN BUT THE DEAL WAS ACTALLY WITH IT’S HOLDING SUBSIDIARY.
LESS THAN A YEAR LATER, THE PARTNERSHIP BETWEEN THE TWO COMPANIES TO SET UP THE $19.5 BILLION PLANT HAS COME TO AN ABRUPT HALT.
TO MAKE INDIA A MANUFACTURING HUB AND MANUFACTURE ELECTRONIC DEVICES IN INDIA TO DEVELOP A DOMESTIC ELECTRONIC SUPPLY CHAIN AND EVENTUALLY REDUCE IMPORTS. (RATHER THAN PRESENTLY MANUFACTURED IN ABROAD AND IMPORTED TO INDIA FOR ASSEMBLING).GOVERNMENT OF INDIA HAS ALSO PRESENTED SOME PROPOSALS TO ENCOURAGE FOXCONN CONTINUE THE DEAL. IT HAS EVEN ALLOWED FOXCONN TO SET UP A FAB (LAB) INDEPENDENTLY.
ON DECEMBER 2021, THE CENTRE ANNOUNCED A $10 BIILION PACKAGE TO PROMOTE THE PROJECT (ACCOUNTED TO 50% OF THE TOTAL PROJECT COST) AND STATE GOVERNMENT HAS ALSO OFFERED INCENTIVES (GUJARAT-RS. 29000 CRORE) & (MAHARASHTRA – RS.39000 CRORE)
ON 10 JULY 2023, FOXCONN SAID IN A STATEMENT THAT IN ORDER TO EXPLORE MORE DIVERSE DEVELOPMENT OPPORTUNITIES IT HAD DECIDED NOT TO MOVE FORWARD ON THE JOINT VENTURE WITH VEDANTA. FOXCONN IS WORKING TO REMOVE ITS NAME FROM WHAT IS NOW A FULLY OWNED ENTITY OF VEDANTA TO ESCAPE FROM CAUSING CONFUSION FOR FUTURE STAKEHOLDERS. THIS NEWS IMPACTED THE SHARE PRICE OF VEDANTA (FROM RS.283 TO RS.277).
THIS MIGHT NOT BE THE REAL REASON OF THIS PULL OUT.
THE REAL REASON COULD BE THE HEAVY DEBT LOAD VEDANTA HAVE WHICH LEADS TO ITS INABILITY TO PAY FOR ACQUIRING THE NECESSARY TECHNOLOGY FOR CHIPMAKING.
CURRENT SCENARIO OF VEDANTA AND FOXCONN SEMICONDUCTOR DEAL
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ON 12 JULY 2023, FOXCONN ANNOUNCED TO PURSUE INDIA PLAN WITHOUT VENDANTA.THIS MOVE IS TO TAKE ADVANTAGE OF INCENTIVES OFFERED BY INDIAN GOVERNMENT. FOXCONN NOW WANTS TO SET UP ATLEAST 4-5 SEMICONDUCTOR FABRICATION LINES IN INDIA (GUJARAT AND OTHER STATES TOO).
THEY ALSO HAS INKED MoU(MEMORANDUM OF UNDERSTANDING) WITH TECHNOLOGICAL PARTNERS.
THE ANNOUNCEMENT OF FINAL APPLICATION SHOULD BE MADE IN THE NEXT 45-60 DAYS, AS THEY ARE NOW AWARE OF THE PROCEDURE (PAST EXPERIENCE WITH VEDANTA).
ANIL AGGARWAL HAS ALSO ANNOUNCED TO ENTER THE CHIPMAKING MARKET SOON WITH SOME OTHER PARTNER.
THE DREAM OF INDIA TO INSTALL A SEMICONDUCTOR PLANT MAY OR MAY NOT WORK OUT WITH BUT ABU-DHABI BASED NEXT ORBIT AND ISRAEL’S TOWER MIGHT MERGE TO SET UP A $3 BILLION PLANT IN KARNATAKA SOMETIME IN FUTURE.
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