Taiwan's Foxconn has withdrawn from a $19.5 billion semiconductor joint venture with the billionaire Anil Agarwal-led metals-to-oil conglomerate, Vedanta.

Issuing a statement on Monday, the electronics major said it had worked with Vedanta for more than a year to bring “a great semiconductor idea to reality”, but they had mutually decided to end the joint venture and it will remove its name from an entity that is now fully owned by Vedanta.

“Foxconn is working to remove the Foxconn name from what is now a fully owned entity of Vedanta. Foxconn has no connection to the entity and efforts to keep its original name will cause confusion for future shareholders,” Hon Hai Technology Group (Foxconn) said in a statement.
 
“In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta,” it said.

Last year, the world's largest contract electronics maker, best known for assembling iPhones and other Apple products and now expanding into chips, had signed a deal with Vedanta  to set up semiconductor and display production plants in prime minister Narendra  Modi's home state of Gujarat. The announcement comes as a setback to the PM’s chip-making plans for India.

Foxconn said it is confident about the direction of India’s semi-conductor development. “We will continue to strongly support the government’s Make-In-India ambitions and establish a diversity of local partnerships that meet the needs of stakeholders,” it said.

Vedanta too issued a statement saying it is fully committed to its semiconductor project and had lined up other partners to set up India’s first foundry.

“Vedanta reiterates that it is fully committed to its semi-conductor fab project and we have lined up other partners to set up India’s first foundry. We will continue to grow our semi-conductor team and we have the licence for production grade technology for 40nm from a prominent integrated device manufacturer (IDM) Vedanta has redoubled its efforts" to fulfill PM Modi's vision, it said.
 
Union minister of state for IT, Rajeev Chandrasekhar on Twitter said that  Foxconn's decision had no impact on India's plans, adding that both companies were valued investors with significant investments in the country.

He said it was not for the government to “get into why or how two private companies choose to partner or choose not to”.

The development comes as a setback to Modi’s vision of turning chipmaking as a top priority for India's economic strategy and inviting foreign investors to manufacture chips locally for the first time.

As per the deal, Vedanta would have financed the project and held 60 percent of the equity in the venture and Foxconn would have owned the remaining 40 percent. Foxconn was the technical partner in the venture.

India, which expects its semiconductor market to be worth $63 billion by 2026, last year received three applications to set up plants under a $10 billion incentive scheme.

These were from the Vedanta-Foxconn joint venture, a global consortium ISMC which counts Tower Semiconductor as a tech partner and from Singapore-based IGSS Ventures.

The $3 billion ISMC project got stalled due to numerous reasons; one of them was that its Tower was acquired by Intel. The $3 billion plan by IGSS also had to stop as the firm wanted to re-submit its application. The project also faced hurdles like incentive approval delays by the Indian government.