Hon Hai said on Monday (14th) that it plans to build a chip factory in partnership with Indian natural resources group Vedanta, making the Taiwanese company the first major foreign technology maker to respond to India's move to move chip production to India.

According to Nikkei Asia, Hon Hai said the two companies agreed to form a joint venture for the project, in which Hon Hai would invest $118.7 million and hold a 40 percent stake. Anil Agarwal, chairman of Vedanta, will serve as chairman of the joint venture. The joint venture aims to meet the huge demand in the local electronics industry.

Vedanta is India's largest aluminum producer, a major supplier of oil and gas, and also has a presence in the telecommunications sector.

"This is the first joint venture between the two companies and will support Prime Minister Narendra Modi's vision to create a semiconductor manufacturing ecosystem in India," Hon Hai said in a statement.

Hon Hai was also one of the first major tech manufacturers to back Modi's "Make in India" campaign, which aims to boost domestic manufacturing in India, where Hon Hai has established several production centers.

However, progress on the chip project will also depend on subsidies from India's central and state governments, as well as loans from banks, according to people familiar with Hon Hai's plans.

India has joined a number of countries lobbying to build and strengthen its own chip supply chain. This follows an unprecedented global shortage of chips across industries ranging from smartphones to PCs to automobiles. India has approved incentives worth 760 billion rupees ($9.94 billion) to spur local manufacturing of semiconductor and display panels. Both the EU and the US have introduced similar support measures.

Taiwan has the world's second-largest chip industry after the United States and controls the majority of advanced chip manufacturing. For decades, Taiwan has built a complete chip supply chain on its west coast. However, there are growing concerns that advanced chip production is concentrated on the island.

Although widely regarded as a key assembler of the iPhone, Hon Hai has dreamed of building its own semiconductor capacity for years. The main subsidiaries, Peixin Semiconductor and Fanxuan System Technology, produce chip equipment parts and provide chip facility construction services. Hon Hai also has an in-house semiconductor business unit that provides various chip design solutions.

Liu Yangwei, chairman of Hon Hai, believes that chip development is one of the foundations for the company to promote the development of electric vehicles. The company last year acquired Taiwanese chipmaker Acer's chip factory in the northern Taiwan city of Hsinchu to develop silicon carbide chips for cars.

The company acquired a 5% stake in Dagang Exchange Bhd (DNex), the parent company of Malaysian chipmaker Silterra, securing a seat for Hon Hai on the DNex board. To strengthen its capabilities in this area, Hon Hai has been poaching engineers from TSMC and UMC for the past few years, Nikkei Asia reported earlier.