InvestorQ : Can you tell me about the chip making plans that Vedanta group has for the Indian market?
prachi Patwardhan made post

Can you tell me about the chip making plans that Vedanta group has for the Indian market?

sara Kunju answered.
1 month ago

The grand plans of Anil Agarwal of Vedanta to come up with a chip plant in India to manufacture semiconductors and microchips appears to be fructifying. Exactly 6 years after his original proposal to set up a fab unit in India to make chips was rejected by the Indian government Agarwal is likely to become India’s biggest chip maker, in collaboration with Foxconn of Taiwan. Incidentally, Foxconn outsources the procurement of chips and the manufacture of mobile phones to big names like Apple and Xiaomi.

As usual, his plans are on the aggressive sides. He plans to take Vedanta on to become a $3.5 billion chip manufacturing company in India. Out of this, nearly one-third will be exported to other countries while the balance two-third of the chips manufactured will be purely retained for domestic usage. The good thing here is that Foxconn has all the requisite agreements and the technology in place to start the manufacture of electronic microchips.

A total of 3 companies have applied for the license to manufacture microchips in India under the PLI scheme and the joint venture of Vedanta and Foxconn is one of them. Apart from the manufacture of microchips for usage in a variety of industries, Vedanta has also applied for setting up a display fabrication (fab unit). This unit will make screens used for display in electronic devices. Vedanta expects to meet these sales targets by FY2027.

Vedanta Group has got deep pockets and it has therefore earmarked investments of up to $20 billion for the semiconductor business, out of $15 billion will be invested in the first 10 years itself. Microchips is a capital intensive business as each fab runs into billions of dollars and companies like TSMC invest billions of dollars each year in expanding capacity. That is the kind of global competition that Vedanta would be up against in this business.

The advantage for Vedanta from the JV with Foxconn is that the latter is not just one of the largest operators of foundries for manufacture of chips. In fact, Foxconn is one of the largest procurers of semiconductors to the tune of $30 to $40 billion each year on behalf of big customers like Xiaomi and Apple. This gives them a naturally huge market. Foxconn brings with it the IP to make 28 nanometre (nm) microchips, which is current industry standard.

There is an interesting story about how semiconductors became so central to the global growth story. India has a vision to manufacture 1 billion smartphones by 2030, 15 million television sets and 24 million notebooks annually by 2030 for domestic consumption. That has to be fed by billions of microchips that will perform the critical memory and processing functions. Today, everything is getting smart and smartness needs chips.