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Semiconductor Plant Row: Mega Vedanta-Foxconn Deal to Gujarat Leaves Maharashtra Govt Jittery | Why is the Project a Big Deal?

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The Eknath Shinde-led government of Maharashtra has been at the receiving end of criticism, particularly from those who were part of the previous MVA government, for losing a crucial Vedanta-Foxconn semiconductor project to Gujarat.

Indian conglomerate Vedanta and Taiwanese electronics giant Foxconn jointly inked a Memorandum of Understanding (MoU) with the Gujarat government on Tuesday in Gandhinagar to set up a mega semiconductor and display manufacturing unit in Gujarat, that the opposition in Maharashtra claims is a “morsel” snatched from state’s mouth.

The opposition in Maharashtra on Tuesday slammed the Eknath Shinde-led government for the state “losing” out on the Rs 1,54,000-crore venture with the Congress alleging something “sinister” behind the change of location and the NCP saying the plant was “snatched” away.

While Shiv Sena leader Aaditya Thackeray said the Maha Vikas Aghadi government had “very strongly” pursued the project, the Nationalist Congress Party (NCP), the main opposition outfit, accused the BJP-led neighbouring state Gujarat of snatching morsel from Maharashtra’s mouth.

About the Vedanta-Foxconn’s Semiconductor Project Deal with Gujarat

Vedanta, an oil-to-metals conglomerate, and Taiwanese electronics manufacturing giant Foxconn will make one of the largest-ever investments of Rs 1.54 lakh crore in setting up India’s first semiconductor plant in Gujarat.

The 60:40 joint venture of Vedanta-Foxconn will set up a semiconductor fabrication plant, a display unit and a semiconductor assembling and testing facility on 1,000 acres of land in Ahmedabad district.

Out the total investment of Rs 1,54,000 crore, Rs 94,000 crore will go into setting up the display manufacturing unit while Rs 60,000 crore will be invested for the semiconductor manufacturing facility, the official said. As per the MoUs signed by both the parties, the Gujarat government will facilitate the investor in obtaining necessary permissions and clearances from the state departments concerned.

Vedanta Resources Ltd chairman Anil Agarwal on Tuesday said his company is considering a second chip and display manufacturing facility in India, even as it announced the $20-billion (Rs 1.54 lakh crore) investment plan for its first such venture in Gujarat.

What are semiconductor chips? Why is the plant so important?

In simple terms, semiconductor chips are the prominent component that powers electronic items that exist in our surroundings. Usually made of silicon, semiconductor chips help in controlling the electricity in various electronic items like our cars, laptops, smartphones, refrigerators etc.

Semiconductor chips, used in cars, mobile phones and other electronics devices, are not manufactured in India at present. Eight percent of all the chips used in the world are manufactured in Taiwan, followed by China and Japan.

ALSO READ: Taiwan Uses Semiconductor Supremacy to Spin Webs around China, Makes it Look Like a Paper Tiger

This upcoming facility will mark the beginning of chip manufacturing in India. This is also strategically important for India because it will reduce our dependence on other countries, said Gujarat Science and Technology Department Secretary Vijay Nehra, who signed the MoU on behalf of the state government.

Vedanta Chairman Anil Agarwal said on Wednesday that “made in India” semiconductors could drastically reduce the prices of finished products. “Today, a laptop costs Rs 1 lakh, and once the glass as well as the semiconductor chip are available, the same can be priced at Rs 40,000 or less,” he said.

Reason Behind Global Semiconductor Shortage

The Covid-19 pandemic and the lockdown necessitated by it globally exceeded the demand for these semiconductor chips as online activities increased worldwide.

With people landing in new setting where they were required to work from home and spend most of the time on online activities, the market demand for chip-powered computers and smartphones was inundated the supply chain, said to be one of the main reasons why the need and demand for these chips skyrocketed.

ALSO READ: How India’s Semiconductor Mission is Shaping Up to Compete in Global Chip Making Race

While the need for semiconductor chips went up during the pandemic, the Covid-led lockdown forced to shut various economic activities including the chip-making facilities in several countries like South Korea, Japan, the US and China.

Delay in Car Deliveries

Are you waiting for the delivery of their car for months? You’re not alone. Since semiconductor chips are an essential part of modern cars that increasingly depend on electronic circuits and controllers for a variety of functionalities, ranging from engine performance management to deploying safety assistance systems like automatic emergency braking, and more, the shortage of these chips have led to a massive delay in car deliveries.

Carmakers in India import semiconductor chips from companies in China, Taiwan, Denmark, Germany, etc, which is why the shortage has hit Indian auto manufacturing hard, delaying vehicle deliveries.

Economic Survey FY22 also found that semiconductor shortages have prolonged the automobile waiting period in India as production has been impacted.

As per the Economic Survey, the global phenomenon has been blamed on the exponential rise in demand for personal electronics such as cellphones and laptops during the ongoing pandemic. The survey document cited a report by investment bank Goldman Sachs 2021 which states that the supply chain disruptions in the semiconductor industry have spillovers in over 169 industries.

Political Row Over Semiconductor Plant

Gujarat bagging the mega Vedanta-Foxconn semiconductor project has snowballed into a political row in Maharashtra where the opposition and those part of the previous MVA government has claimed that they had brought the deal to the final stage.

Shiv Sena leader and minister in the previous MVA government Aaditya Thackeray on Tuesday hit out at the Eknath Shinde-led government for letting go off “an almost finalised” deal out of Maharashtra.

ALSO READ: ‘MVA Bought This to Final Stage’: Aaditya Slams Shinde Govt for Losing Vedanta’s Semiconductor Plant to Gujarat

The Rs 1.54 lakh-crore venture by the mining conglomerate Vedanta, Thackeray said, was brought to a final stage of being set up in Maharashtra under the Maha Vikas Aghadi (MVA) government.

Sharing the news of the project on Twitter, Thackeray said, “Although I’m glad to see this in India, I am a bit shocked to see this. The new dispensation had tweeted photos, claiming to have brought this to Maharashtra, but it seems intent/ commitment was to send this away from Maharashtra.”

“Our MVA Govt had brought this to final stage,” Aaditya Thackeray added.

Aaditya Thackeray said the mega project would have supported 160 ancillary industries and generated 70,000 to 1 lakh employment opportunities. He said the previous MVA government was in touch with the company and a meeting had also taken place with its representatives in January this year.

Slamming the Shinde-led dispensation, which took office on June 30, the junior Thackeray said, “What was the government doing? What was the industries minister doing? On July 26, the CMO tweeted that the plant will come up in Maharashtra”.

Here’s the July 26 tweet:

NCP, the main opposition outfit, accused the neighbouring state, ruled by the Bharatiya Janata Party (BJP), of snatching morsel from Maharashtra’s mouth. State NCP president and former minister Jayant Patil said with the big-ticket project slipping away from the hands of Maharashtra, the state has lost an investment potential of more than Rs one lakh crore.

Terming it a “huge disappointment”, NCP MP Supriya Sule on Wednesday said over 3 lakh students are going to be deprived of jobs.

Supriya sule attacked the Maharashtra government over losing the key Vedanta-Foxconn deal and said, “CM Eknath Shinde was an integral part of the earlier government, what was he doing then, why didn’t he say anything? He is the current CM for over two months now, if he wants to lead, he needs to take responsibility and be accountable”.

PM Modi Assured of Equally Big Project for Maharashtra, Says CM Eknath Shinde

Amid the political blame game in Maharashtra over Vedanta-Foxconn picking Gujarat for their semiconductor plant, CM Eknath Shinde spoke to PM Modi late Tuesday expressing concern over the state losing the mega project.

State industries minister Uday Samant said in a press conference that PM Modi assured CM Shinde that Maharashtra would get to host “an equally big or even bigger investment project” in the near future.

Speaking to media on Wednesday, CM Shinde said, “Big industries don’t shift in one-two months, they had already made up their mind. They have now said that in the future they will promote electronics industries here and set up a hub to manufacture iPhone and TV equipment. PM has also assured us that in the future, the central government will give full support to get big industry.”

ALSO READ: Chip Shot: Despite Asian Dominance, China’s Advancement, US Aims to Be Semiconductor Powerhouse

CM Eknath Shinde accused the previous MVA government of not being responsive enough to the Vedanta-Foxconn and added that he had a meeting with the firm over the semiconductor plant soon after assuming charge as CM and also offered all subsidies and incentives.

“Vedanta-Foxconn may not have got a response from the state as expected or the response may have fallen short of their expectations,” CM Shinde said.

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