Explained: Here's what Foxconn's MoUs and letters to Karnataka and Telangana mean

Last year, Foxconn's decision's to set up a semiconductor plant with its partner Vedanta, in Gujarat instead of Maharashtra, kicked up a political storm. The world's biggest iPhone manufacturer, facing trouble at its largest factory in China, is now looking for alternatives in India and Vietnam to prevent disruptions. Now Foxconn's commitment to set up more iPhone units in South India, has triggered a controversy involving Telangana and Karnataka.

Another tale of two states

Last week, Karnataka's CM celebrated Foxconn's decision to set up a 300 acre iPhone factory near Bengaluru, which will generate one lakh jobs. Around the same time, Telangana CM made an announcement about similar plans made by Foxconn for his state. Days after that, Foxconn clarified that it hasn't signed any binding agreement at all, and now both CMs have shared letters from its Chairman Young Liu.

What has Liu told Bommai and KCR?

On one hand Liu's letter of intent to Karnataka CM Bommai mentions commitment towards 'Project Elephant', which will be a 300 acre facility with one lakh jobs. Then the one to Telangana CM KCR indicates plans for a 200 acre unit in Kongara Kalan. In both cases Foxconn has signed Memorandums of Understanding (MoU), with governments in both states that he visited.

Is an MoU a final deal?

An MoU is a document outlining the joint will of two parties to sign an imminent agreement, but it isn't the deal itself. Although the memorandum indicates plans for a deal, it isn't a legally binding document, which means it doesn't have to materialise. For instance less than 40 per cent of the MoUs signed at a Global Investors Meet in Karnataka in 2022 actually materialised. For instance, a large number of Vibrant Gujarat MoUs also didn't translate into actual deals that could be implemented.

As of now, Foxconn has an MoU with both Telangana and Karnataka, which is possible, and its Chairman has met and written letters to CM of both states. It remains to be seen, where it decides to move forward with a final, legally binding deal.