In a setback to Indian Prime Minister Narendra Modi’s intentions for Indian chip manufacturing, Taiwan’s Foxconn announced on Monday that it had left a $19.5 billion joint venture in the semiconductor industry with Indian metals-to-oil behemoth Vedanta.

The largest manufacturer of contract electronics in the world, Foxconn, and Vedanta agreed to establish semiconductor and display manufacturing facilities in Gujarat, Prime Minister Modi’s home state, last year.

“Foxconn has determined it will not move forward on the joint venture with Vedanta,” the electronics maker said in a statement, without elaborating on the reasons.

Vedanta and Foxconn had been collaborating on “a great semiconductor idea” for more than a year, but they had mutually agreed to discontinue the joint venture, and Foxconn will have its name removed from what is now a totally owned Vedanta firm.

In order to usher in a “new era” in electronics manufacturing, Modi has prioritised chipmaking for India’s economic plan, and Foxconn’s decision is a setback to his hopes of recruiting international investors to produce chips locally for the first time.

When contacted for comment, Vedanta did not respond right away.

Foxconn is well known for building iPhones and other Apple products, but it has recently started to diversify its company by stepping into the chip industry.

According to earlier reports, Modi’s plan was in jeopardy since the Vedanta-Foxconn project was moving slowly due to a stalemate in their negotiations to include the European chipmaker STMicroelectronics as a partner.

STMicro had agreed to a technological licencing agreement with Vedanta-Foxconn, but the Indian government made it clear that it wanted the European company to have more “skin in the game”—perhaps a stake in the partnership.

A source had previously stated that STMicro was not keen on that and that the conversations were still ongoing.

Three applications to establish facilities under a $10 billion incentive programme were received last year from India, which anticipates that its semiconductor market will be worth $63 billion by 2026.

These came from IGSS Ventures in Singapore, the Vedanta-Foxconn joint venture, and the international consortium ISMC, which counts Tower Semiconductor among its technology partners.

Due to Tower’s acquisition by Intel, the $3 billion ISMC project has also been put on hold, and IGSS’s $3 billion plan was also shelved because the company intended to reapply.

(Adapted from EconomicTimes.com)