Apple supplier Foxconn has pulled out of a $19.5 billion deal with Indian mining giant Vedanta to build a chip manufacturing facility in the country.
It has been less than a year since the companies announced their plans to set up the plant in the state of Gujarat, home to Prime Minister Narendra Modi.
Some analysts see this as a blow to the country’s tech industry ambitions.
But a government minister says it will have no impact on the country’s chip production targets.
Taiwan-based Foxconn said in a statement that “both sides realized that the project was not progressing fast enough.”
The firm continued, “There were challenges that we couldn’t get past the project-related issues smoothly, and there were also external issues that were independent of the project.”
Foxconn previously told the BBC that the decision was made as a result of “mutual agreement” with Vedanta, adding that the company will “continue to strongly support” India’s “Make in India” goals.
New Delhi-based Vedanta has “agreed with other partners to build India’s first chip factory.”
“Foxconn’s unexpected withdrawal could be considered a serious blow to India’s semiconductor ambitions,” Paul Triolo of global consulting firm Albright Stonebridge Group told the BBC.
“The reason for the withdrawal appears to be the lack of a clear technology partner and a path for the joint venture. Neither side had significant experience in developing and managing a large-scale semiconductor manufacturing operation,” added Triolo.
However, Rajeev Chandrasekhar, India’s Minister of State for Electronics and Information Technology, said on Twitter that Foxconn’s decision “has no impact on India’s semiconductor factory targets”. Chandrasekhar added that Foxconn and Vedanta are the country’s “valued investors” and “will now independently pursue their strategy in India.”
The Indian government is working on strategies to support the semiconductor manufacturing industry.
Last year, it created a $10 billion fund to attract more investors to the industry to reduce reliance on foreign semiconductor manufacturers.
Prime Minister Modi’s program “Make in India”, launched in 2014, aims to turn the country into a global manufacturing hub that rivals China.
In recent years, several other companies have also announced plans to build semiconductor factories in India.
Last month, US memory chip giant Micron announced that it will invest up to $825 million to build a semiconductor assembly and test facility in India.
Micron stated that work to build the new facility in Gujarat will begin this year. The project is expected to directly create 5,000 jobs and 15,000 jobs in the region.