Foxconn and HCL Collaborate for Semiconductor OSAT Venture in India
Foxconn Technology Group from Taiwan and India's HCL Group have officially announced their collaboration to establish a joint venture for the creation of a semiconductor outsourced assembly and testing (OSAT) unit. In this venture, Foxconn will secure a 40% equity stake through a $37.2 million investment, as confirmed by both companies. “HCL Group plans to partner with Foxconn Group to establish OSAT operations in India. HCL Group has a strong engineering and manufacturing heritage and this is an opportunity that provides strategic adjacency to the Group portfolio", an HCL Group spokesperson said.
Foxconn Hon Hai Technology India Mega Development Pvt. Ltd, a subsidiary of Foxconn Technology Group, has notified the Taiwan Stock Exchange that the joint venture (JV) is outlined in a non-binding memorandum of understanding, and subsequent negotiations will follow. According to a senior industry expert familiar with the situation, the proposal is currently being evaluated by the India Semiconductor Mission.
Industry insiders added that since HCL has had semiconductor design and testing software expertise for a long time, besides existing partnerships with a number of top chipmakers, a partnership with Foxconn made sense for both parties. The declaration of the partnership follows a statement from Rajeev Chandrasekhar, the Minister of State for Electronics and Information Technology, who revealed that the government has received nine proposals for the establishment of various semiconductor fabrication units. These proposals also include plans for plants dedicated to testing semiconductors manufactured elsewhere in the world.
“After Micron’s successful investment, there has been an extremely robust pipeline of proposals that have come. There’s a lot more interest. There are two very serious fab proposals, four OSAT proposals and three compound fab proposals", he said while briefing on the National Startup Day. The minister did not name the companies that have submitted proposals. US-based Micron Technology Inc. had announced an $825 million investment into its assembly, testing, monitoring and packaging (ATMP) plans in India, and started construction of its first unit in September last year, with plans to produce the first packaged chip by the end of this year.
Foxconn Technology Group was among the initial applicants for the scheme, but it withdrew from its joint venture (JV) with Vedanta Ltd last year. The JV, which aimed to invest $20 billion in India, had plans to establish a semiconductor fabrication unit, a display unit, and a semiconductor assembly and testing unit. The 60:40 partnership could have set up the country’s first semiconductor manufacturing unit under the $10 billion government-backed financial incentive scheme. However, after the fallout, both parties said they would proceed with their plans independently.
Observers in the industry noted that Foxconn possesses substantial expertise in establishing large-scale plants, particularly in the field of instrumentation. Additionally, on a global scale, the company is actively exploring diversification beyond contract manufacturing due to concerns about a slowdown in the market. “They essentially operate in a low-margin business of less than 5%, which an OSAT business can help them improve. Their presence in Taiwan means that they can bring key companies from the semiconductor supply chain", said a senior industry executive.
