In the Indian semiconductor space, Foxconn has grabbed headlines in the last year or so, but mostly for the wrong reasons. When Vedanta and Foxconn announced their JV last year, many perceived it to the point which kickstarted India’s semiconductor manufacturing ambitions.

However, the JV no longer exists. But as per the Economic Times Foxconn could partner with Taiwan Semiconductor Manufacturing Company Limited (TSMC) or Japan’s TMH Group to keep its ambitions of building chips in India alive. 

Why is TSMC an unlikely partner?

Today, TSMC is one of the largest chip foundries in the world catering to the likes of Apple, NVIDIA, Google and AMD, among others. Headquartered in Hsinchu, Taiwan, TSMC was the first foundry to market 7 nm and 5 nm chips and is currently working on 3nm and 2 nm chips as well.

Considering TSMC’s prominent position in the semiconductor industry, this news has led to a sense of optimism and hope among many Indians. However, Arun Mampazhy, semiconductor analyst, is a bit sceptical. First of all, he believes TSMC was very hesitant to move outside Taiwan. “It’s only because of geopolitical factors and US’ agreeing to protect Taiwan, TSMC agreed to open shop there,” Mampazhy told AIM.

Besides, TSMC is also setting up fabs in Japan and Europe respectively. In Japan, TSMC aims to manufacture 5 nm and 10 nm chips from the second half of the decade. Similarly, in Europe, TSMC is in talks with Germany, to set up a fab in Saxony, Germany.

Mampazhy believes that establishing fabs in Germany and Japan would be a logical move. For instance, in Japan, Sony and Denso serve as partners to TSMC and contribute significantly to its business, thereby providing advantageous opportunities for TSMC by setting up a fab in Japan. However, Foxconn does not bring any similar benefits to TMSC in India. 

“Given Foxconn is only an assembler, it is very unlikely that TSMC will agree to do a technology transfer or share that technology with Foxconn,” Mampazhy said. The only way he sees a potential partnership with TSMC is if Foxconn assumes responsibility for the financial aspects of establishing a fab in India. “However, even with such support, TSMC faces considerable challenges in managing the workforce required for its upcoming fabs in Japan, the US, and Germany.”

Is Trust in Foxconn waning?

Foxconn tryst with semiconductors isn’t new either. Back in 2018, the Taiwanese electronics contract manufacturer announced plans to establish chip manufacturing facilities in China, but no tangible progress has been made on that front. Similarly, in India, their joint venture with Vedanta was intended to initiate their foray into chip production; however, this endeavour also failed to materialise.

“Foxconn has a history of promising and not delivering in multiple places. Wisconsin is one, then, there have been other instances of engaging with the Saudi Arabian government, Malaysia, and possibly even Mexico. In about five or six countries, Foxconn has been known to fall short of fulfilling its commitments,” Mampazhy said.

In fact, Foxconn has already been part of many controversies in India. Last year, the contract manufacturer found itself embroiled in one when both Telangana and Karnataka governments simultaneously claimed Foxconn to have signed up for big investments in their respective states to manufacture electronics. In a manner reminiscent of their past experiences, a similar situation unfolded in Foxconn’s foundry plans. Their proposed joint venture with Vedanta, which was well-advanced in talks for a site in Maharashtra, abruptly shifted to Gujarat just before the state elections.

“Foxconn has the reputation for being one of the most opaque companies in an opaque world,” Lawrence Tabak, the author of Foxconned: Imaginary Jobs, Bulldozed Homes, and the Sacking of Local Government, said.  According to him, Foxconn had no problem in making big announcements for the cause of a government’s electoral ambitions without having any concrete plan of action. Hence, given Foxconn’s dubious reputation, the TSMC news could also be smoke and mirrors.

Taiwan’s interest in India

The possibility of the two Taiwanese companies collaborating to establish a fab in India remains to be seen. However, it is worth noting that the Taiwanese government has exhibited keen interest in India over time. Baushuan Ger, Taiwan’s ambassador to India, earlier said that both nations should sign the free-trade agreement (FTA) at the earliest.

Ger said Taiwan is willing to share its expertise with India in critical sectors such as semiconductors, 5G, information security, and AI. Most recently, Taiwanese Foreign Minister Jaushieh Joseph Wu also sparked discussions around a FTA with India. While interacting with the press in Taipei, Wu said that Taiwan has been actively encouraging its companies, which no longer find the Chinese market profitable, to relocate their production facilities to India. 

Given, Taiwan alone accounts for about 60% of the total global foundry market, India stands to greatly benefit from such a deal. However, despite keen interest from Taiwan for a FTA with India, nothing has materialised so far. 

The post Why Foxconn-TSMC Partnership is Unlikely  appeared first on Analytics India Magazine.