Indian Government Rejects Vedanta-Foxconn Chip Venture’s Funding Bid for ‘Silicon Valley’ Ambitions
The Indian government is poised to reject the application of Vedanta-Foxconn chip venture for crucial funding under the Production Linked Incentive (PLI) scheme, according to multiple sources. The venture, which was announced last year by billionaire Anil Agarwal as a step towards building India’s “own Silicon Valley”, has failed to meet the criteria set by the government for making 28-nanometer chips.
The PLI scheme, which was launched in April 2021, aims to boost domestic manufacturing of semiconductors and displays, and offers incentives ranging from 4% to 25% on incremental sales for a period of five years. The scheme has attracted applications from global players such as Samsung, Intel, Micron and SK Hynix, as well as domestic firms such as Tata Group and Reliance Industries.
However, the Vedanta-Foxconn venture, which plans to invest $7.4 billion in a chip manufacturing unit in partnership with Hon Hai Technology Group (Foxconn), has not been able to secure a technology partner or license manufacturing-grade technology for the construction of 28nm chips, which are considered the minimum requirement for making advanced semiconductors. The venture has also not submitted a detailed project report or a feasibility study to the government, sources said.
The government is expected to inform the venture soon that it will not be eligible for the PLI scheme, and that it will have to reapply with a revised proposal if it wants to avail the benefits. The government is also likely to advise the venture to focus on making larger chips, such as 65nm or 90nm, which are easier to manufacture and have more demand in the market.
The rejection of the Vedanta-Foxconn application is a setback for Agarwal’s ambition to diversify his metals and mining conglomerate into the high-tech sector, and to tap into the global shortage of semiconductors that has affected various industries such as automobiles, consumer electronics and telecom. Agarwal had said last year that he wanted to create more than 100,000 jobs and make India a global hub for chip design and manufacturing.
However, experts have expressed doubts about the feasibility and viability of Agarwal’s chip venture, given the lack of experience and expertise in the field, the high capital and operational costs involved, and the intense competition from established players. They have also questioned the rationale behind choosing 28nm technology, which is already outdated and has low margins.
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