Photo: VCG

Foxconn, the world's biggest contract electronics manufacturer, has pulled out of a nearly $20-billion semiconductor joint venture with an Indian company, dealing another major blow to New Delhi's ambitious plans to make India a global manufacturing hub.

It's the latest in a series of global companies that have pulled out of the Indian market, underscoring the subpar business environment in India due to its opaque regulatory system and stubborn protectionism against foreign investment.

In a statement, Foxconn said it "has determined it will not move forward on the joint venture with Vedanta." Underscoring the company's determination to ditch the project, Foxconn said that it was working to "remove the Foxconn name" from the joint venture.

In September 2022, Foxconn signed a deal with Indian mining firm Vedanta to invest $19.4 billion in the Indian state of Gujarat, also the home state of Indian Prime Minister Narendra Modi, to build one of India's first semiconductor manufacturing facilities.

While the deal was initially praised by Indian officials and media reports, troubling signs have been emerging in recent weeks.

In May, India's deputy IT minister said that the JV was "struggling" to tie up with a technology partner, according to Reuters. At the end of May, Reuters reported that even though the joint venture had agreed to choose STMicroelectronics for licensing technology, the Indian government stepped in and made clear it wanted the European firm to have "more skin in the game." Then on June 30, 2023, India's market regulator punished Vedanta for releasing a press release that suggested it had partnered with Foxconn to make semiconductors in India.

Though the exact reason for Foxconn's withdrawal was not immediately clear, the Indian government's apparent interventions may have something to do the company's decision, which comes just weeks after reports of the Indian government's moves.

The deal was part of India's government-backed campaign to build domestic chipmaking capacity, and its demise deals a serious blow to what has already been a slow rollout. The Indian government approved a $10 billion incentive plan in December 2021 to build its chipmaking ecosystem, but only three companies applied for it, and all of them have made little progress, according to media reports.

US semiconductor company Micron Technology plans to start construction in August on a $2.75-billion chip assembly and test facility in India, but the project is much smaller than the Foxconn joint venture.

India's overall manufacturing ambitions have been hit by a series of setbacks, as a growing number of foreign businesses have been leaving the country in recent years. US auto giant Ford pulled out of India in September 2021, saying that "demand was much weaker than forecast."

Many Chinese companies have also abandoned their plans in India as the Indian government launched what appears to be a politically motivated crackdown campaign against Chinese firms - banning Chinese products and raiding Chinese firms' local offices.

Many have been touting India's potential and ambitions to become a manufacturing power on par with China, but the growing number of foreign companies abandoning India shows the country's serious regulatory and other flaws.

Global Times