India's Semiconductor Industry is at the growth stage. It is expected to grow at a CAGR of 19.7% from 2022F to 2026F-Business Wire
Table of Content
SECTION 1: What is Vedanta and Foxconn’s Indian Chips Marriage?
The Marriage!
Story So Far
SECTION 2: How This Partnership Could Impact India’s Semiconductor Industry
SECTION 3: What Does This Mean for the Global Semiconductor Market?
SECTION 4: What Challenges Could Arise From this Partnership?
SECTION 5: Conclusion
SECTION 1: What is Vedanta and Foxconn’s Chips Marriage?
14th Feb 2020: Vedanta Ltd announced that it had signed a memorandum of understanding (MOU) with Hon Hai Technology Group (Foxconn) to form a joint venture to develop semiconductor manufacturing capabilities in India. Under the partnership, Vedanta will provide the necessary infrastructure and support, while Foxconn will bring in its expertise in semiconductor manufacturing.
It marks Vedanta's entry into the semiconductor industry, which is a high-tech and capital-intensive sector. Second, it is a significant step towards India's goal of becoming a leading player in the global semiconductor industry. Third, it will help Foxconn diversify its supply chain and reduce its reliance on China.
The joint venture will focus on the development of chips for electric vehicles, 5G networks, and other emerging technologies.
The Marriage!
The joint venture between Vedanta ltd and Foxconn (Hon Hai Precision Industry Co., Ltd.) will spend ₹1.54 lakh crore to build a semiconductor chip manufacturing plant facility in Gujarat (Dholera Special Investment Region (DSIR).
The joint venture discloses its plans as part of the ₹76,000 crore production-linked incentive (PLI) program to improve India's capacity to manufacture semiconductor chips. According to estimates, the project has the potential to generate 1 lakh new jobs. (Source : PIB)
Story, So Far
India launched the Semicon India Program under the Semiconductor Mission of India on 15th Dec 21. Govt of India wants to attract investment in the field of semiconductors. This scheme aimed at widen and deepen the electronic manufacturing and ensure development of a robust and sustainable Semiconductor and Display ecosystem in the country.
Following the launch of the PLI scheme with an outlay of more than $10 Billion for the development of semiconductor ecosystem in India. The scheme started attracting over 100 domestic proposals shortly. (Source: MeitY).
The series of events which followed are listed:
31st Jan 23: The US Semiconductor Industry Association (SIA) and the India Electronics and Semiconductor Association (IESA) decided to form a private sector task force to strengthen bilateral collaboration in the global semiconductor ecosystem. (Source: SIA)
19th Feb 23: Five major companies shared interest to establish electronic chip and display manufacturing plants with an investment of ₹1.53 trillion (approx. US$20.5 billion). (Source: Economic Times)
20th Feb 23: Anil Agarwal (Vedanta Ltd) signed a joint venture agreement with Foxconn, to invest ₹1.54 trillion in the construction of a display fabrication unit, an integrated semiconductor fabrication unit, and an OSAT (Outsourced semiconductor assembly and test) facility. Vedanta Displays Ltd. will invest ₹94,500 crore in this project to establish a display fabrication unit, and Vedanta Semiconductors will invest ₹60,000 crore to establish an integrated semiconductor fabrication unit and OSAT facility. With Hon Hai Precision Industry Co., Ltd. owning 40% of the Gujarat project through Foxconn Semiconductor Group, Vedanta will hold 60% of it. (Source: Mint)
SECTION 2: How This Partnership Could Impact India’s Semiconductor Industry
According to the research reports of Ken Research Pvt Ltd India's Semiconductor Industry is at the growth stage. It is expected to grow at a CAGR of 19.7% from 2022F to 2026F. Presently this industry is 100% import driven.
As per government data, the semiconductor imports surged 65.2 per cent in 2021-22.
The major exporters for semi-conductors to India are; China, Japan, Taiwan & USA. But China enjoys more than 50% of the share. Amid the US-China trade war post-pandemic there was serious pressure on the supply chain.
Retail vehicle sales drop 10.7% in Jan, chip shortage hurting- Fortune India
The” Ultra-affordable” smartphone manufacturing initiative by Jio with collaboration of Google had to be postponed on 2021. This was due to the acute shortage of semi-conductors.- Mint
The Union govt released Semicon India Program under the “Aatma-Nirbhar-Bharat” campaign, aiming to widen and deepen the electronic manufacturing and ensure development of a robust and sustainable Semiconductor and Display ecosystem in the country.
In 2020, India spent $15 billion on electronics imports, of which 37 percent came from China-The Wire
Demand for semiconductor chips is set to grow to around $100 billion by 2025. - Bloomberg
The partnership between Vedanta and Foxconn has the potential to positively impact India's semiconductor industry by strengthening the country's domestic semiconductor manufacturing capabilities.
Top 5 Countries That Produce the Most Semiconductors: Taiwan South Korea Japan United States China (*50% share is with TSMC, Taiwan) |
This partnership (MoU to invest ₹1,54,000 crore) could bring several benefits to India's semiconductor industry. For one, it would increase the country's semiconductor production capacity, which is currently limited. As India is heavily reliant on semiconductor imports, this joint venture could reduce the country's dependency on foreign suppliers and improve the supply chain's resilience.
India to spend $30 billion in its tech industry and chip supply chains to avoid being dependent on foreign producers.-Nikkei Asia
Additionally, this partnership could create job opportunities and support the growth of India's technology industry. It would provide a boost to the country's "Make in India" initiative, which aims to make India a global manufacturing hub and attract foreign investment to the country.
Anil Agrawal Said, "It will reduce our electronics imports and provide 1 lakh direct skilled jobs to our people... going from job seekers to job creators!
Electronics manufacturing in India has already generated around 25 lakh (2.5 million) jobs. Modi ji has now given us the target to expand this 25-lakh employment record to 1 crore jobs (10 million). It means we need to take electronics manufacturing in the country from $80 billion to $300 billion,-Ashwini Vaishnaw, India’s IT Minister .
Furthermore, the partnership could also lead to the development of more advanced technology products, which could help India compete with other major semiconductor manufacturing countries such as China, Taiwan, and South Korea.
SECTION 3: What Does This Mean for the Global Semiconductor Market?
Fresh Tension with China
The move to set up a joint venture between India and Taipei could spark fresh tensions with China, which claims the island country as its own. China is also one of the key exporters of semiconductors to India.
It will provide a significant boost to domestic manufacturing of electronics in India. Discussions are currently ongoing with a few state governments to finalize the location of the plant.- Anil Agrawal
The joint venture between Vedanta and Foxconn could have significant implications for the global semiconductor market. Here are a few potential effects:
Increased competition: The partnership could lead to increased competition in the semiconductor market. India is a large market with a growing demand for electronics, and a joint venture with strong financial backing from both Vedanta and Foxconn could lead to more affordable, high-quality products in the market.
Improved supply chain: The joint venture could help to improve the global semiconductor supply chain by creating a new source of chips and components. This could reduce the industry's reliance on a small number of key players, making the market more stable and less vulnerable to supply chain disruptions.
New markets: The joint venture could open up new markets for semiconductor products. With the growth of the Indian economy, there is an increasing demand for electronic devices in the country. This could create new opportunities for semiconductor companies to expand their businesses into this market.
Technology advancements: The partnership could lead to advancements in semiconductor technology. Foxconn is a major player in the electronics industry and has expertise in areas such as artificial intelligence, 5G, and cloud computing. The joint venture could leverage this expertise to develop new and innovative semiconductor products.
Overall, the joint venture between Vedanta and Foxconn could shake up the global semiconductor market by introducing a new player with significant financial backing and expertise. While it may take time for the joint venture to have a significant impact, it is likely to be watched closely by industry insiders and investors.
SECTION 4: What Challenges Could Arise From this Partnership?
Controversy surrounding the shifting of plant from Maharashtra to Gujarat
The step-motherly treatment of non-BJP govt states by the Center-Karnataka District in-charge Minister Umashree
The controversy started when the Vedanta-Foxconn JV was relocated from Maharashtra to Gujarat at the 11th hour. If reports of Deccan Herald are to be believed Maharashtra offered Rs 12,000 crore more benefits to the mega project than Gujarat.
This has started serious political war of words between the central government and the opposition. Which could hamper the smooth working and growth of the Joint-Venture in coming days.
Other challenges
Apart from the political challenge the joint venture between Vedanta and Foxconn to produce semiconductor chips and related technology products in India could face several challenges, including:
Lack of infrastructure: One of the primary challenges facing the semiconductor industry in India is the lack of infrastructure. The country's infrastructure is not well-suited for semiconductor manufacturing, which requires a clean room environment and significant investments in equipment and facilities.
Skilled workforce: India has a large pool of engineers and skilled workers, but there is a shortage of workers with the necessary skills for semiconductor manufacturing. The joint venture will need to invest in training programs and attract experienced personnel to develop and operate the semiconductor manufacturing facilities.
Regulatory hurdles: The semiconductor industry is heavily regulated, and the joint venture will need to navigate various regulatory hurdles to establish and operate the manufacturing facilities in India.
Access to capital: The semiconductor industry requires significant investments in research and development, equipment, and facilities. The joint venture will need access to capital to fund these investments, which could be a challenge given the high costs involved.
Competition: The semiconductor industry is highly competitive, with established players such as Taiwan Semiconductor Manufacturing Company (TSMC) and Intel dominating the market. The joint venture will need to compete with these established players to gain market share and establish itself as a significant player in the semiconductor industry.
Overall, the joint venture between Vedanta and Foxconn faces several challenges, but with the right political support, global expertise, and advanced R&D support, it could help to establish India as a significant player in the global semiconductor market
SECTION 5: Conclusion
The joint venture between Vedanta and Foxconn marks an exciting new chapter in the world of technology and industrial development. As two giants in their respective fields, the collaboration promises to bring cutting-edge innovation and advanced manufacturing capabilities to India. With Vedanta's expertise in mining and metals, and Foxconn's extensive experience in electronics manufacturing, the joint venture has the potential to drive economic growth and create new opportunities for the country. It will be fascinating to watch as these two industry leaders work together to explore new possibilities and push the boundaries of what is possible in the world of technology.
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Reference
1) Vedanta & Foxconn MOU
2) Dezan Shira & Associates-India Briefing
3) PIB (Press Information Bureau)
4) ISM.gov
5) MEITY (Ministry of Electronics and Information Technology)
6) US Semiconductor Industry Association (SIA)
7) Economic Times
8) Wikipedia
9) Mint News
10) Research And Markets
11) Atlantic Council
12) Fortune India
13) Aatma Nirbhar Bharat
14) The Wire
15) Bloomberg
16) Nikkei Asia
17) Make In India
18) News On Air.gov.in
19) Deccan Herald
20) The Hindu.
It helps to grow the economic conditions of the country.
Amazing write-up..
Informative
Lovely research. Didn't know we are 100% import oriented.
Semiconductor is directly influenced by Geo-political scenarios. To have a inhouse production for the same could prove beneficial for a country which has 100% of semiconductor imported.