Vedanta sets aggressive targets for chip manufacture in India

Anil Agarwal has been known to have two unique qualities. He is known to evaluate his opportunities for a long time. Having once zeroed in on the opportunity, he moves fast and with a lot of aggression. Its latest such foray is into the manufacture of microchips to capitalize on the global shortage of microchips. The Vedanta group will manufacture chips in collaboration with Foxconn of Taiwan, a world leader in outsourcing electronic products and one of the largest outsourcing manufacturers for the Apple group.

In the microchips business, the Vedanta group proposes to touch total business turnover in the range of $3 billion to $3.50 billion annually. Out of this total revenues, Vedanta expects nearly one-third or around $1 billion of sales to come from the export of microchips, while the rest will be utilized domestically in India. The advantage of a tie-up with a group like Foxconn is that the latter has all the requisite agreements and the technologies in place to start the manufacture of electronic microchips right away.

This joint venture between Vedanta group and Foxconn of Taiwan is among the 3 companies that have applied for setting up semiconductor manufacturing units in the country. Semiconductors have been covered under the production linked incentive (PLI) scheme. In addition, Vedanta has also applied for setting up a display fabrication (fab unit) that will make screens that are used for display in electronic devices. The sales target of $3.5 billion is proposed to be achieved by the financial year 2027, when it goes on stream.

The plans are fairly aggressive. In fact, Vedanta Group has earmarked investments of up to $20 billion for the semiconductor business overall, out of which it plans to invest $15 billion in the first 10 years itself. Back in 2015-16 also, the company had made an attempt to set up a chip plant but back then the approvals were not forthcoming from the government. That is because, the chip situation was not that dire in those days and even the PLI scheme was not yet operational back in 2015-16. However, things have changed substantially now.

Foxconn is not only one of the largest operators of foundries for manufacture of chips, but Foxconn is also one of the largest procurers of semiconductors. They buy chips worth $30-40 billion each year on behalf of the phones that they manufacture on behalf of companies like Apple and Xiaomi. The advantage for Vedanta is that Foxconn brings with it the IP (Intellectual Properties) to make 28 nanometre (nm) technology related microchips, which is the general and most accepted technology in this business.

Semiconductors lie at the core of India’s massive electronic manufacturing plan. For instance, India has a vision to manufacture 1 billion smartphones by 2030, 15 million television sets and 24 million notebooks annually by 2030, purely for domestic consumption. The commitment given by Vedanta to the Indian government is that it would reserve just about 10% of tis displays and 20% of its semiconductors for exports. The rest would be supplied to India to serve their microchip manufacturing needs.

To begin with, the focus will be on making the 28 nanometre (nm) chips, which his tried and testing. The ideas is to be able to manufacture world class microchips right here in India ad a more economical costs. Overall, Vedanta will manufacture a total of 40,000 panels of semiconductor and 60,000 panels of display per month. The final approval for the application is still pending with the government of India. The government has also assured semiconductor companies like Foxconn of policy support besides fiscal incentives.