Foxconn Announces Investment of $9 Billion to Build a Chip Factory in Saudi Arabia

Foxconn Technology Group, Apple Inc.'s largest assembler of iPhones, is in talks with Saudi Arabia to jointly build a $9 billion multipurpose plant that could produce microchips, electric car parts, and other electronics such as displays, according to informed sources.

The Saudi government is reviewing an offer from the company, formally known as Hon Hai Precision Industry Co. to build a two-line manufacturing plant for surface-mount technology and wafer fabrication in Neom, a growing technology-focused city-state in the kingdom. Discussions about the project began last year, they said.

Saudi Arabia is conducting due diligence and comparing the offer to other offers Foxconn has made for similar projects around the world, one of the people familiar with the matter said.

In addition to Saudi Arabia, Foxconn is also in discussions with the United Arab Emirates about possibly locating the project there, one of the people familiar with the matter said.

The Taiwan-based company is seeking to diversify its production base amid growing tensions between mainland China and the United States, which puts it at a potentially vulnerable point.

Riyadh wants the company to guarantee that at least two-thirds of its foundry production will be directed to Foxconn's existing supply chain to ensure there are buyers for its products and that the project is ultimately profitable, a person familiar with the matter said.

Foxconn is seeking massive incentives including financing, tax holidays, and electricity and water subsidies in exchange for help in establishing high-tech manufacturing in the country as Saudi Arabia seeks to diversify its economy away from oil, people familiar with the matter said.

Another person familiar with the matter said Saudi Arabia could offer direct equity co-investment, industrial development loans, low-interest debt from local banks, and export credits to compete with other jurisdictions Foxconn might consider.

Saudi authorities and Foxconn did not respond to requests for comment.

In recent years, Foxconn has been looking to diversify its business beyond Apple products, including expanding its activities in electric vehicles. It has partnered with automakers such as Jeep and Chrysler maker Stellantis NV and Los Angeles-based electric vehicle startup Fisker.

Foxconn has also acquired semiconductor facilities, including one owned by Taiwan's Hongli International, in its quest to become a contract manufacturer of global branded electric vehicles. Last year, it scaled back plans for a Wisconsin LCD project after agreeing to invest $10 billion and hire 13,000 employees for $2.85 billion in incentives.

The company said last year that it plans to build an electric vehicle program in the Middle East that will focus on software and cloud infrastructure for passenger cars.

Saudi Arabia is trying to build an industrial sector as part of Crown Prince Mohammed bin Salman's plan to reshape its economy by creating new industries to supplement oil revenues as the world transitions to renewable energy.

Foxconn to build a wafer fab in India

Major iPhone assembler Foxconn said Monday it plans to build a chip factory in a joint venture with Indian natural resources group Vedanta, making the Taiwanese company the first major foreign technology maker to answer the South Asian country's call to move chip production to the country, Nikkei reported.

The iPhone assembler said the two companies agreed to form a joint venture for the project, with Foxconn investing $118.7 million and taking a 40 percent stake. Vedanta Chairman Anil Agarwal will serve as chairman of the joint venture, which is designed to meet the huge demand in the local electronics industry.

Vedanta is India's largest aluminum producer, a leading oil and gas supplier, and has an interest in the telecom sector.

In a statement, Foxconn said, "The first joint venture between the two companies will support Prime Minister Narendra Modi's vision of creating a semiconductor manufacturing ecosystem in India."

The company is also one of the first major technology manufacturers to support Modi's "Make in India" to boost domestic manufacturing and has established several production centers in the country.

However, progress on the chip project will also depend on subsidies from India's central and state governments as well as bank loans, according to a person familiar with Foxconn's plans.

India joins an array of countries lobbying to establish and strengthen their own chip supply chains after an unprecedented global chip shortage hit a wide range of industries from smartphones to personal computers to automobiles. India has approved incentives worth 760 billion rupees ($9.94 billion) to spur local manufacturing of semiconductors and display panels. The European Union and the United States have each launched programs with similar support measures, and the European Commission recently announced a €43 billion ($4.86 billion) program to develop its chip supply chain.

Taiwan has the world's second-largest chip industry after the U.S., controlling a large share of advanced chip manufacturing, and has built a complete chip supply chain on its west coast for decades. However, there are growing concerns about the concentration of advanced chip production on this island.

Foxconn, while widely regarded as a major assembler of iPhones, has harbored dreams of building its own semiconductor capacity for years. Major subsidiaries Foxsemicon and Marketech International Corp. manufacture chip equipment parts and provide chip facility construction services. It also has an in-house semiconductor business unit that provides a variety of chip design solutions.

Foxsemicon's chairman has identified chip development as one of the foundations of the company's push into electric vehicles. The company last year acquired Taiwanese chipmaker Macronix's chip plant in the northern Taiwanese city of Hsinchu to develop silicon carbide chips for automobiles.

It also acquired a 5 percent stake in Dagang NeXchange Berhad (DNS), the parent company of Malaysian chipmaker Silterra, in a deal that secured Foxconn a seat on DNex's board. As Nikkei Asia reported earlier, Foxconn has been hiring engineers from TSMC and UMC for the past few years to strengthen its capabilities in the field.

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