In an attempt to get into the semiconductor industry, Foxconn, best known for producing Apple’s iPhones, is relying on emerging technologies like artificial intelligence to boost demand for chips. The Taiwanese company’s trip into the semiconductor market, however, has run into difficulties, highlighting the enormous obstacles for new entrants in a sector controlled by established giants with extensive knowledge and intricate supply networks.
The business’s drive into semiconductors has picked up steam recently. In May 2021, it established a joint venture with Yageo Corporation and bought a chip factory from Taiwanese chipmaker Macronix. The $19.5 billion joint venture Foxconn entered into the Indian giant Vedanta to build a semiconductor and display manufacturing facility there was the company’s most important move. The goal of Foxconn’s diversification strategy is to enable the company to serve the electronics and automotive industries as a full-service solution provider.
The country’s efforts to strengthen its domestic semiconductor sector and encourage onshore manufacturing were the main factors in the choice to partner with Vedanta in India. Foxconn, however, recently withdrew from the Vedanta joint venture due to difficulties and other factors. Deadlocked negotiations with the project’s technical partner, the European chipmaker STMicroelectronics, were a key factor in the demise of the initiative.
Taiwan Semiconductor Manufacturing Company (TSMC), which has a 59% market share in the foundry sector, dominates the semiconductor manufacturing scene. TSMC’s position as a top chipmaker has been cemented by its experience and decades of investment. The fact that Foxconn and Vedanta depend on third-party technology and intellectual property highlights how difficult it is for entrants to join the semiconductor manufacturing industry.
The semiconductor sector has high entry hurdles, Neil Shah, Vice President of Research at Counterpoint Research, emphasizes, requiring significant capital and skilled personnel. A corporation must normally invest more than two decades in order to build the size and expertise required for success in semiconductor production.
The difficulties posed by new entrants trying to compete with industry heavyweights are best shown by Foxconn’s experience in the semiconductor business. Newcomers have a difficult road to building profitable semiconductor enterprises as the market for cutting-edge technology continues to expand. Established businesses retain a commanding position because to their strong R&D skills and considerable expenditures.
