Foxconn withdraws from USD 19.5 billion joint venture with Vedanta

On July 10 Foxconn, the prominent Taiwanese electronics manufacturing company, announced its decision to withdraw from a joint-venture project with Vedanta, a company involved in semiconductor manufacturing. 

India’s Vedanta Shares fell over 2% today, that is the day after Taiwan’s Foxconn said it withdrew from a USD 19.5 billion semiconductor joint venture with the metals-to-oil conglomerate.

Last year on February 14, Foxconn and Vedanta joined forces to establish a semiconductor manufacturing venture in India, aiming to diversify Foxconn’s business. Foxconn expressed its belief that this collaboration would greatly enhance domestic electronics manufacturing in India. 

Vedanta and Foxconn signed agreements to invest a substantial amount of USD 19.5 billion in the establishment of semiconductor and display production facilities in Gujarat on September 13, 2022. 

Since the partnership between Foxconn and Vedanta was formed to diversify Vedanta’s business through semiconductor manufacturing in India, the shares of Vedanta have experienced a negative return of approximately 23% during the given period. 

Before this withdrawal, it was reported that the Vedanta Foxconn project was experiencing difficulties. Negotiations to bring European chipmaker STMicroelectronics on board for technology licensing had reached a deadlock. The Indian Government was keen for STMicroelectronics to have a more significant stake in the venture, a condition that the European company did not seem interested in. 

According to S&P Global Ratings, the planned semiconductor business of Vedanta is not expected to create immediate liquidity pressure. The agency further stated that it does not foresee a significant funding commitment for the semiconductor project in the immediate future, pending government approval. 

Vedanta expressed its commitment to the semiconductor project despite Foxconn’s withdrawal. The company stated that it will continue to expand its Semiconductor team and highlighted that it possesses a license for production-grade technology for 40nm chips from a well-known Integrated Device Manufacturer (IDM). 

Currently, while writing this article the shares of Vedanta Ltd are trading around Rs 278.75, 1.24% down from the previous day’s closing price of Rs 282.25. Its 52-week highs and lows are Rs 340.75 and Rs 221.55, respectively. 

The current market capitalisation of Vedanta Ltd is Rs 1,03,728.4 crore. Over the last three months, Vedanta has delivered a modest return of approximately 2.1%. This indicates a relatively modest performance for the company during that specific time frame. 

Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.