Vedanta and Foxconn’s joint venture to manufacture semiconductors and glass for different electronics items is certainly good news for the Indian electronics ecosystem. Prime Minister Narendra Modi’s effort to bring the manufacturing of semiconductors in India is finally becoming a reality.
Vedanta and Foxconn jointly will invest 1.54 Lakh crore which is around 20 billion US dollars, in Gujarat in which 94500 crore rupees will be invested in the manufacture of display units, and the rest 60000 crores rupees will be invested in the manufacturing of semiconductors it also includes testing facility.
Today most laptop is being imported from either China Taiwan or South Korea, and currently, there is an 18% IGST on the imported laptop we can expect that this GST may reduce if the company start assembling their product in India also, especially when semiconductor and glass is available in the country.
This joint venture will also benefit other electronics such as phones, electric vehicles, television, etc, currently total import charge on mobile phones and accessories ranges from 38 % to 48% which is a huge number so you can also expect a use decline in the price of mobile phone if they start using Indian build glass and semiconductor in the future.
This joint venture will develop 28nm technology notes for this semiconductor and it will produce a third-generation display that can be used in different types of devices. In this deal, Vedanta has a 60% stake and Foxconn has 40% stake.
Anil Agarwal, chairman of Vedanta during the agreement signing with Foxconn said, “laptop that is currently worth 1lakh will cost just around Rs30000-40000” that means he is expecting a 60% reduction in the cost of laptops which is a significant number.
The main question is, whether this benefit will go down to the end consumer, it’s a matter of time if the manufacturer will increase their profit margin or will give benefit to the consumer. Let’s understand the area where a laptop company will benefit from this manufacturing unit.
Recently HP and Acer have started their production of laptops in India which is a major boost to the Make in India initiative, and if the Greek critical component like classes and this semiconductor for their product is available within India then we can expect a use decline in the input price.
According to Firstpost, electronics company can cut their manufacturing price up to 20% easily, and if produce on a large scale and meet the Economics of a scale they can cut their cost price up to 30%, but it is not yet sure they will able to cut why 60% is claimed by Mr. Anil Agrawal.
And in my opinion, if somehow a Company gets a 60% reduction in the price of a product then there is a high possibility that other companies will increase their profit margin or the government would impose an extra tax and the end consumer will get less benefit expecting around 10 to 20%.
In a series of tweets, Anil Agarwal said “India’s own Silicon Valley is a step closer now. #India will fulfil the digital needs of not just her people, but also those from across the seas. The journey from being a Chip Taker to a Chip Maker has officially begun”
India's own Silicon Valley is a step closer now. #India will fulfil the digital needs of not just her people, but also those from across the seas. The journey from being a Chip Taker to a Chip Maker has officially begun…Jai Hind! 🇮🇳 (4/4)— Anil Agarwal (@AnilAgarwal_Ved) September 13, 2022
After this deal, it is expected that more companies will start investing in this ecosystem, and there is a plan to build a cluster of electronics companies in Maharashtra, Telangana, and Gujarat. This, in turn, will create a lot of skilled jobs in the country.
The government is also luring investors to invest in the ecosystem and had also announced the 10 billion dollar PLI scheme. If everything goes as per plan we can expect a bright future for electronics companies in the Indian market.