Taiwanese contract manufacturer Foxconn and Indian conglomerate HCL Group have announced a joint venture to carry out semiconductor packaging and testing business in India. As part of the collaboration, Foxconn will invest US$37.2 million for a 40% stake, marking India's growing prominence in the technology supply chain.
Foxconn Hon Hai Technology India Mega Development, Foxconn's subsidiary in the region, aims to establish an outsourced semiconductor assembly and test (OSAT) center. In addition to the OSAT center, Foxconn has also been allowed to invest another approximately US$1 billion in building a factory in India to produce Apple products.
This is an important step for Foxconn to establish manufacturing centers outside of China, a trend we have seen in the past. The move also resonates with the Indian government's "Make in India" initiative and is expected to create jobs and promote skills development in the Indian semiconductor industry.
"The HCL Group has a strong engineering and manufacturing heritage and this is an opportunity to provide strategic value addition to the group's product portfolio," an HCL spokesperson said in a statement to Moneycontrol.
As early as November, Foxconn announced that it would invest US$1.5 billion in India. The company is also partnering with local manufacturing group Vedanta to build a $20 billion semiconductor manufacturing plant in the Indian state of Gujarat. But in July this year, Foxconn withdrew from this cooperation on the grounds of finding the most suitable partner. The cooperation with HCL marks Foxconn's strategic shift to the Indian market. HCL Group, known for its engineering and manufacturing capabilities, has been actively engaging with the Karnataka government to set up the OSAT plant.
More and more countries are pushing for local semiconductor manufacturing to reduce dependence on Chinese manufacturing, especially in the wake of the COVID-19 pandemic. Semiconductor demand will be slightly sluggish in 2023, which will also lead to lower than expected corporate profits. However, as it will take time for manufacturing plants and production units to become fully operational, governments and businesses still want to increase local supplies to prevent supply chain tensions from recurring in the future.