India’s semiconductor plans suffer a major setback.

According to the Shanghai Securities News on July 11, on July 10, Foxconn issued a statement saying that it had withdrawn from a semiconductor joint venture worth $19.5 billion (about 141 billion yuan) with India’s Vedanta Group.

Hon Hai, the parent company of Foxconn, said in a statement released in the evening that over the past year, Hon Hai Technology Group and Vedanta have worked together to realize the common semiconductor concept in India, which is a fruitful cooperation experience and also lays a solid foundation for the next step of both sides. In order to explore more diversified development opportunities, according to the agreement between the two parties, Hon Hai will no longer participate in the joint venture operation of the two parties.

On July 7, Vedanta said it would take over ownership of the joint venture with Hon Hai from its holding company. “Hon Hai has decided not to pursue the joint venture with Vedanta. Hon Hai will remove the Hon Hai name from Vedanta’s current wholly-owned entity.” Hon Hai did not say why it had made the decision. Reuters previously reported that Vedanta’s joint venture with Hon Hai was progressing slowly because of an impasse in talks with European chipmaker ST.

Foxconn pulls out of India semiconductor plan

Foxconn said the two sides had been working together for more than a year to build a chip factory in India, but had now unanimously decided to end the plan. Foxconn will remove the name from the joint venture, which is now fully owned by Vedanta.

Foxconn parent company Hon Hai said in a statement: Over the past year, Hon Hai Technology Group and Vedanta have worked together to realize the common semiconductor concept in India, which is a fruitful cooperation experience and also lays a solid foundation for the next step of both sides. In order to explore more diversified development opportunities, according to the agreement between the two parties, Hon Hai will no longer participate in the joint venture operation of the two parties.

Foxconn did not say why it was pulling out of the joint venture. The $19.5bn project would have been one of Foxconn’s largest overseas projects. Foxconn, best known for assembling iphones and other Apple products, has been expanding into chips in recent years to diversify its business.

Reuters, citing people familiar with the matter, said plans for the joint venture plant were progressing slowly. Foxconn decided to pull out of the joint venture because of concerns about delays in approving incentives from the Indian government. The government has also raised some questions about the estimated cost of providing incentives to the government.

Specifically, according to Bloomberg, Hon Hai’s cooperation with Vendanta to build a 28-nanometer chip factory has not met the Indian government’s standards, so it can not get up to billions of dollars in subsidies. The Indian government had asked the joint venture to reapply for incentives because of a change in its original plan to produce 28-nanometer chips.

Modi has made chip manufacturing a top priority in India’s economic strategy to pursue a “new era” in electronics manufacturing, but Foxconn’s move is a blow to his ambitions to attract foreign investors to make chips in India.

“The failure of this deal is definitely a setback for ‘Make in India’,” said Neil Shah, vice president of research at Counterpoint. He added that it also worked against Vedanta and made other companies surprised and suspicious.

India’s junior minister for Information Technology, Rajeev Chandrasekhar, said Foxconn’s decision had “no impact” on India’s plans, adding that both companies were “valued investors” in the country and it was not for the government to “explore why or how two private companies choose to cooperate or choose not to cooperate.”