Hon Hai Trading group, better known as Foxconn, is predominantly an electronics contract manufacturing company. One of the main iPhone assembling contractors for Apple, Foxconn officially has its headquarters in Taiwan, but gets most of its revenue from China, where it runs multiple factories and employs a big workforce.
Foxconn also wants to go up the supply chain and get into chip manufacturing or semiconductor fabs. It appears that Foxconn contacted various countries — China, Malaysia, and Saudi Arabia — in an attempt to get government incentives to build fabs. So far none of these countries are known to have given big incentives, quite likely knowing that Foxconn does not have any experience in the kind of silicon fabs it proposes to build in those countries.
With heightened tensions between the United States and China, and Apple increasingly favouring India as an alternative, Foxconn too has plans to expand its assembly factories in India. When in March 2021 there were rumours that the Government of India was considering giving incentives for fabs, it quite likely caught Foxconn’s attention too. The policy, albeit not exactly what was rumoured earlier, was eventually approved by India’s Cabinet in December 2021 and soon there was an announcement that Vedanta signed an MoU with Foxconn to build fabs in India. The joint venture (JV) applied for incentives for silicon fab by a February 15, 2022 deadline, but it appears they did not have all the prerequisites.
In a $7.5 billion proposal, Vedanta may be looking for nearly 50 percent incentive from the Centre and another 20 percent from Gujarat. The remaining 30 percent works out to be $2.25 billion. As per reports, Foxconn is expected to pay only $118.7 million but get nearly 40 percent stake. This anomaly, if true, can be explained only by Vedanta being made to believe that Foxconn has the technology.
While there were some voices, including that of this author, repeatedly pointing out that Foxconn has no experience in owning or running the kind of semiconductor fabs it has applied for incentives along with Vedanta, some in India would falsely call Foxconn as a ‘chip giant’ without knowing the difference between assembling chips made by some other company into a final product versus that of fabricating those chips.
Even Minister of Electronics Ashwini Vaishnaw in an interview given in February singled out and praised Vedanta-Foxconn from among the three applicants, and said that Foxconn brings market for the chips. However, Foxconn has little say in which chip Apple would like to use in its products, which company to buy it from, and where that company gets the chip fabricated. Decisions on some discrete components may be in Foxconn’s hands, but what the Vedanta-Foxconn $7.5billion fab promises to make are not those, but integrated circuits using 28nm technology on silicon wafers of 300mm diameter — an expertise that the JV does not cover.
Not surprisingly, Bloomberg recently published a report pointing out that the Vedanta-Foxconn application does not have the technology experience demanded by the policy and that attempts at licensing it from an experienced high volume fab partner has not yet been confirmed. Recent news that the government may give conditional approval to Vedanta-Foxconn also points to the possibility that there has not been binding agreements for production-grade technology licenses yet.
Meanwhile, it is not the first time that Foxconn has been able to create an impression beyond its capabilities among policy-makers. Lawrence Tabak details some of those in his book titled Foxconned: Imaginary Jobs, Bulldozed Homes, and the Sacking of Local Government.
Foxconn had promised LCD display fabs and thousands of jobs in Wisconsin, for which the ground-breaking happened in June 2018. By June 2019, Foxconn changed its stand and Louis Woo, special assistant to the founder and the then CEO of Foxconn, Terry Ghou, announced that “Rather than a focus on LCD manufacturing, Foxconn wants to create a ‘technology hub’ in Wisconsin that would largely consist of research facilities along with packaging and assembly operations”. Tabak’s book notes that ‘Perhaps because he had been overly honest and blunt, by the end of September 2019, Woo was no longer employed by Foxconn’.
The book mentions that as of early 2020 Foxconn claims to have made $522 million in investments in two warehouse structures, five guardhouses, and a smoking shack. Wisconsin had to pay $52million as subsidy despite not getting the promised display fab.
For the Government of India, it is billions that are at stake. It is also possible that Vedanta is getting a bad deal, especially if it must sweat to get production grade licensed technology despite giving 40 percent stake to Foxconn in the false hope that Foxconn has or will bring the technology.
(Arun Mampazhy is a semiconductor engineer. Twitter: @nano_arun)
Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.