Foxconn, the main assembler of Apple’s iPhones, has faced challenges in its semiconductor venture in India, highlighting the difficulties new players encounter in entering a market dominated by established firms with extensive experience and complex supply chains.
The Taiwanese company has been aggressively expanding into the semiconductor industry, anticipating increased demand for chips driven by technologies like artificial intelligence. However, its foray into semiconductors has encountered hurdles, underscoring the barriers to entry for newcomers in a market where established players such as TSMC, Samsung, and Micron have invested heavily in research and development for decades.
Foxconn’s recent endeavors include forming a joint venture with Yageo Corporation, acquiring a chip plant from Taiwanese chipmaker Macronix, and establishing a semiconductor and display production plant in India through a joint venture with Vedanta, a conglomerate. The aim of these moves is to diversify Foxconn’s business and position itself as a comprehensive solution provider for electronics and automotive companies.
The decision to partner with Vedanta in India was driven by the country’s efforts to boost its domestic semiconductor industry and promote onshore manufacturing. However, Foxconn recently withdrew from the joint venture with Vedanta, citing slow progress, challenging gaps, and external issues unrelated to the project. One significant obstacle was deadlocked talks with European chipmaker STMicroelectronics, which was expected to provide technology for the venture but did not agree to have a stake in it.
Foxconn’s struggles in the semiconductor space shed light on the difficulty of breaking into this industry, dominated by Taiwan Semiconductor Manufacturing Company (TSMC), which holds a 59% market share in the foundry segment. TSMC’s expertise and extensive investments over the past two decades have secured its leading position. Furthermore, the supply chain supporting TSMC’s chip manufacturing is highly specialized and complex.
The challenges faced by Foxconn and Vedanta highlight the importance of core competency in chip manufacturing, as they heavily relied on third-party technology and intellectual property. Becoming a successful semiconductor manufacturing company requires significant investments, specialized labor, and decades to achieve the required skill and scale.
In conclusion, Foxconn’s failed chip venture in India exemplifies the challenges faced by new entrants in the semiconductor industry. The market is concentrated among a few established players with extensive experience and intricate supply chains. Overcoming the barriers to entry, including capital intensity and access to critical intellectual property, requires significant time, investment, and expertise.
