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Foxconn withdraws from a $19 billion chip manufacturing endeavor in India.

Foxconn has announced it will no longer participate in a plan to help establish one of India’s first semiconductor manufacturers in the country.

The largest contract electronics manufacturer in the world announced on Monday that it will “no longer move forward” with a joint venture in Asia’s third-largest economy with Vedanta (VEDL), an Indian metals and energy company valued at $19.4 billion.

Indian officials have tried to downplay the news’ impact on their country’s plans to become a tech manufacturing powerhouse.

Foxconn, a Taiwanese electronics behemoth best known for being one of Apple (AAPL)’s top suppliers, released a statement saying the decision was based on “mutual agreement” and allowed the company “to explore more diverse development opportunities.”

Vedanta has acquired 100% of the joint venture.

In a follow-up statement released on Tuesday, Foxconn said it would still invest in making chips in India and would apply for a government program that helps pay for setting up facilities to make semiconductors or electronic displays in the country.

Foxconn stated it is “committed to invest in India,” using the industry word for semiconductor manufacturing, “fabs,” which stands for “building fabs from scratch in a new geography.”

“Both parties acknowledged that progress on the project was slower than desired due to a number of factors, including several particularly difficult gaps that we were unable to bridge smoothly,” it said.

Vedanta announced it had secured additional funding and partnerships to build India’s first semiconductor manufacturing facility.

A chipmaker has granted the conglomerate a license to develop 40-nanometer chips, and it will shortly receive a license to produce 28-nanometer chips, it said.

A business representative stated that “India remains crucial in realigning the world’s semiconductor supply chains.”

The goal of the semiconductor industry is to shrink and speed up microchips. In contrast, IBM boasted in 2021 that it had produced the world’s tiniest and most powerful microchip at just 2 nanometers in size.

Modi’s approval

In February of 2022, the announcement of the purchase was met with much fanfare.

No details were given on the facility’s investment, but in September, Indian Prime Minister Narendra Modi tweeted that the overall investment will equal to 1.54 trillion rupees, or around $19.4 billion at the time.

Since the announcement of the joint venture in January, Foxconn CEO Young Liu has been actively seeking fresh prospects in India.

As many multinationals aim to expand their supply chains beyond China, the company, which has existing plants in the Indian states of Andhra Pradesh and Tamil Nadu, is just one of many global tech corporations eyeing prospects in the country.

On Monday, Ashwini Vaishnaw, India’s minister of electronics and information technology, told an Indian news site that both Vedanta and Foxconn are “completely committed to India’s semiconductor mission.”

A tweet from India’s minister of state for electronics and IT, Rajeev Chandrasekhar, said the decision would still allow “both companies to independently pursue their strategies” in India and that India’s plans to make semiconductors don’t “change in any way.”

India desperately needs the industrial sector to grow in order to reduce unemployment, and this project had been heralded as a major step in that direction.

The project was presented by Prime Minister Modi as a major boon to the economy and job creation.

On Tuesday, following the announcement, shares of Foxconn jumped 1.3% in Taipei, while those of Vedanta slid 1.4% in Mumbai.

Other well-known tech firms have also recently made moves to increase production in India.

Micron (MICR), a US chipmaker, revealed this month that it would be opening India’s first semiconductor assembly and test production facility in the western state of Gujarat.

According to the business, “up to 5,000 new direct Micron jobs and 15,000 community jobs over the next several years” will be created as a result of the initiative.

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