Vedanta Shares Drop 3% after Foxconn Withdraws from Semiconductor JV: Impact, Analysis, and Future Prospects

Vedanta Shares Experience 3% Decline as Foxconn Exits Semiconductor Joint Venture

Introduction

The shares of Vedanta, a company owned by billionaire Anil Agarwal, fell by 3% on the BSE after its $19.5 billion JV with Foxconn, a Taiwanese component maker, for making semiconductors in India was called off. This article examines the reasons for the cancellation, analyzes the effect on Vedanta’s stock performance, and discusses the future outlook of the semiconductor industry in India.

The Termination and Exploration of New Opportunities

Vedanta and Foxconn mutually agreed to terminate their joint venture, which aimed to manufacture semiconductors in India. The termination was driven by a shared desire to explore more diverse development opportunities. While this decision marks the end of their collaborative journey, Vedanta wasted no time and announced its plans to collaborate with other partners to establish India’s first chip foundry.

Impact on Vedanta Shares Performance

Following the termination news, Vedanta’s shares experienced a nearly 3% decline, reaching Rs 275 in Tuesday’s trade on the BSE. However, it’s important to note that on a year-to-date basis, the stock has encountered a 12% decline. Despite this, Vedanta has exhibited a remarkable surge of 21% over the past year, showcasing its resilience in the face of market fluctuations.

Expert Analysis and Market Trends

Gaurav Bissa, the VP at InCred Equities, analyzed Vedanta’s trading patterns and noted that the stock has been in a consolidation phase since March 2023. The presence of hurdles at 295 and support at 260 levels has contributed to the stock’s pressure during recent weeks. Notably, Vedanta is currently trading below the 200-ema on the daily charts, which has further intensified the downward pressure.

However, Bissa emphasized that Vedanta maintains a comfortable position above the 200-ema on the weekly charts. He predicts that the stock will fluctuate between 260 and 295 in the near future. It is crucial to closely monitor whether the stock gives a breakout or breakdown within this range before considering any short-term trading decisions.

Future Prospects of the Semiconductor Industry in India

The joint venture between Hon Hai Technology Group (Foxconn) and Vedanta, announced in February 2022, marked a significant milestone for the Indian semiconductor industry. As one of the early participants in the Indian Semiconductor Mission, a government initiative aimed at bolstering the industry, the collaboration carried strategic importance.

Recent reports from the Economic Times indicated that the joint venture had faced uncertainties and that Foxconn had initiated discussions with other Indian conglomerates to explore additional chip-making partnerships within the country. Foxconn remains confident in the direction of India’s semiconductor development and expressed its commitment to establishing diverse local partnerships that cater to the needs of stakeholders.

Government Statements and Impact on India’s Semiconductor Mission

The Union Minister for Electronics and IT, Ashwini Vaishnaw, said that the Indian Semiconductor Mission would not be negatively affected by the cancellation of the partnership between Foxconn and Vedanta. The commitment of both companies to develop the semiconductor industry and support the “Make in India” initiative remains steadfast.

Rajeev Chandrasekhar, the Minister of State for Electronics and IT, stressed that India’s aim to build a semiconductor fabrication plant is not impacted by Foxconn’s choice to pull out of the partnership. He further stated that the private companies involved can now pursue their strategies independently, collaborating with appropriate technology partners in the field of semiconductors and electronics.

Conclusion

The termination of the semiconductor joint venture between Vedanta and Foxconn has had a notable impact on Vedanta’s stock performance. However, the company has swiftly lined up alternative partners to establish India’s first chip foundry, indicating its determination to forge ahead. The future of the semiconductor industry in India remains promising, with the government’s continued support and the commitment of industry players.

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