Foxconn, the world’s largest contract electronics maker, on Monday announced it was withdrawing from a $19.5 billion semiconductor joint venture with Indian metals-to-oil conglomerate Vedanta, in a major setback to Prime Minister Narendra Modi’s chipmaking plans for India.

The project had gained momentum last year when Foxconn and Vedanta signed a pact to set up semiconductor and display production plants in Modi’s home state of Gujarat. The joint venture has been in trouble for some time, with talks to involve European chipmaker STMicroelectronics as a partner deadlocked.

STMicro had been brought on board for licensing technology, however the company was not keen on India’s government wanting it to have a stake in

❗️Foxconn once again apply for India chipmaking incentives after pullout from JV with Vedanta

"Foxconn is committed to India & sees the country successfully establishing a robust semiconductor manufacturing ecosystem. Foxconn is working toward submitting an application": Foxcon pic.twitter.com/8tQRf2x7UY

— OsintTV📺 (@OsintTV) July 11, 2023

the partnership. This, in addition to Intel's acquisition of Tower Semiconductor, a tech partner of global consortium ISMC, put a halt to the project.

The withdrawal of Foxconn from the project has dealt a heavy blow to India’s ambitions of luring foreign investors to make chips locally for the first time. India had received three applications to set up plants under a $10 billion incentive scheme, from the Foxconn-Vedanta joint venture, ISMC and Singapore-based IGSS Ventures.

However, the ISMC and IGSS projects have since stalled. The setback for Modi’s chipmaking plans comes at a time when India is expecting its semiconductor market to be worth $63 billion by 2026. India will now have to rely on other measures, such as foreign direct investment and local incentives, to drive its chipmaking ambitions.