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Foxconn signs $37 million chip deal in India

by on18 January 2024

New chip packaging and testing business 

Foxconn is teaming up with Indian software and engineering firm HCL Group to set up a chip packaging and testing business in India in a deal worth $37.2 million.

The move, revealed in a legal document with Taiwan's stock market, comes six months after Foxconn — also known as Hon Hai Precision — ditched a planned chip making joint venture with Indian firm Vedanta Group.

Under the terms of the deal, Foxconn’s Hon Hai Technology India Mega Development unit will get a 40 per cent share in a joint chip packaging and testing business — known as OSAT — with HCL Group.

In a statement, Foxconn said it is excited to start the operations in India with HCL Group. "Through this investment, the partners aim to build an ecosystem and boost supply chain security for the local industry," Foxconn said. The company also will use its build-operate-localize, or BOL model, to help local communities in the area.

Gartner Group analyst Gaurav Gupta said the deal shows Foxconn trying to switch to new markets as it aims to secure its place in India's growing chip ecosystem.

"Foxconn is known more as an EMS [electronic manufacturing services]/ODM [original design manufacturer] company, and they are trying to branch out," Gupta said.

Foxconn has got bad publicity over the years due to cruel working conditions in the Chinese factories that make Apple products.

The companies have since started moving production out of China to get more of a grip in India. As part of this, Foxconn last year promised to invest $500 million in setting up a new Apple AirPod making unit in the Indian state of Telangana.

Now, Foxconn is looking at an investment in India's booming chip market, which was helped by its previous proposed deal with Vedanta to set up a chip making plant in Gujarat.

The company's India plans seemed to go wrong after Foxconn pulled out, saying a change in the company’s strategy after its first plan and plan for making 28-nanometer chips with Vedanta didn't work, an industry analyst said at the time.

Plans seem back on track now that the company has found a well-known Indian tech partner in HCL Group. Also, setting up an OSAT is a smaller, less bold investment than the original Vedanta deal, making it "a low-barrier entry for Foxconn," Gupta said.

"India has a strong consumer base and with a large population, it is a big market for electronics, so entering India is a smart move to be closer to end-market and consumers," he said.

Last modified on 18 January 2024
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