Anil Agarwal's $19-Billion Semiconductor Plant At Risk As Hurdles Mount: Report

Seven months after Agarwal announced a chip partnership between Vedanta Resources and Taiwan’s Hon Hai Precision Industry, the JV is yet to tie up with a fabrication unit operator

Vedanta Resources Chairman Anil Agarwal’s plan to set up a $19 billion chipmaking facility in India is floundering as his venture struggles to secure a technology partner and faces challenges in obtaining financial incentives from the government, as reported by Bloomberg.

Citing sources privy to the development, the news agency reported seven months after Agarwal announced a chip partnership between his Vedanta Resources and Taiwan’s Hon Hai Precision Industry Co., the venture is yet to tie up with a fabrication unit operator or license manufacturing-grade technology. One of those is required for the venture to receive the significant financial incentives the government has pledged for such projects.

The venture’s difficulties highlight how hard it is to set up new semiconductor plants, massive complexes that cost billions to construct and require very specialised expertise to run. Metals and mining group Vedanta and iPhone assembler Hon Hai have no significant chipmaking experience, yet they’re among the first to try to take advantage of India’s ambition to build a semiconductor industry.

Winning government funding is key to fulfilling Agarwal’s chip dream, given his broader empire is facing intensifying financial strain. The billionaire, struggling to shake off the weight of a massive debt pile in his commodities business, is considering divesting a less than 5 per cent stake in Mumbai-listed Vedanta Ltd in a last ditch effort to reduce borrowings, Bloomberg News reported last month.

The talks with GlobalFoundries Inc. and STMicroelectronics NV to license chip fabrication technology haven’t resulted in agreements, the people said, asking not to be identified as the discussions are private. It’s unclear if the talks are still alive.

In an emailed response to Bloomberg, Vedanta said it is committed to the plant and has "identified a strong technology partner to make this project a huge success." It didn’t name the partner or say whether an agreement has been reached.

Hon Hai, also known as Foxconn, didn’t respond to requests for comment. GlobalFoundries, STMicro and India’s technology ministry also didn’t immediately respond to queries.

While it’s working on securing a partner, the venture has submitted a capital expenditure estimate of $10 billion to the Indian government, the people said. The government considers that figure inflated and estimates $5 billion is closer to the true cost, they said. If all the requirements for incentives are met, the government could pay up to a half of a project’s cost. Vedanta said its expense estimate is at par with other similar projects.