Foxconn drops $19.5 billion Vedanta chip plans in blow to India

BENGALURU (Reuters) -Taiwan’s Foxconn (TW:) said on Monday it has withdrawn from a $19.5 billion joint venture with Indian metals-to-oil conglomerate Vedanta (NYSE:), in a setback to Prime Minister Narendra Modi’s chipmaking plans for India.

Foxconn, which did not say why it had taken the decision, and Vedanta signed a pact last year to set up semiconductor and display production plants in Modi’s home state of Gujarat.

“Foxconn has determined it will not move forward on the joint venture with Vedanta. Foxconn is working to remove the Foxconn name from what now is a fully-owned entity of Vedanta,” it said in a statement.

Modi has made chipmaking a top priority for India’s economic strategy in pursuit of a “new era” in electronics manufacturing” and Foxconn’s move represents a blow to his ambitions of luring foreign investors to make chips locally for the first time.

Vedanta did not immediately reply to a request for comment.

Reuters has previously reported that Modi’s plan was in trouble, with the Vedanta-Foxconn project proceeding slowly as their talks to involve European chipmaker STMicroelectronics as a partner were deadlocked.

Vedanta-Foxconn had got STMicro on board for licensing technology, but India’s government had made clear it wanted the European company to have more “skin in the game”, such as a stake in the partnership.

STMicro was not keen on that and the talks remained in limbo, a source had previously said.