Foxconn says it is exiting an ambitious project to help build one of India’s first chip factories.

The world’s largest contract electronics maker will “no longer move forward” with its $19.4 billion joint venture with Vedanta (VEDL), an Indian metals and energy conglomerate, in Asia’s third largest economy, it said Monday.

The news was seen as a blow to the Indian government’s plans to turn the country into a tech manufacturing powerhouse, even as officials have sought to counter that view.

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

The joint venture will now be wholly owned by Vedanta.

In a followup statement Tuesday, Foxconn reaffirmed its commitment to invest in Indian chipmaking, saying it will apply for a government program that subsidizes the cost of setting up semiconductor or electronic display production facilities in the country.

“Building fabs from scratch in a new geography is a challenge, but Foxconn is committed to invest in India,” the company said, referring to fabrication plants, the technical term for semiconductor factories.

“There was recognition from both sides that the project was not moving fast enough, there were challenging gaps we were not able to smoothly overcome, as well as external issues unrelated to the project,” it said.

Since announcing the deal in February 2022, Foxconn said it had worked with Vedanta on plans to set up a semiconductor plant in the country that would support a wider ecosystem for manufacturers.

It did not provide an investment figure for the facility, but Indian Prime Minister Narendra Modi tweeted in September that the total investment would amount to 1.54 trillion rupees, which was then equivalent to $19.4 billion.

Foxconn said last year it was actively scouting for locations for the plant and held discussions with “a few state governments.”

Looking for opportunities

Foxconn CEO Young Liu has in recent months courted Indian partners, having traveled there in February to seek new collaborators.

The company, which already has factories in the Indian states of Andhra Pradesh and Tamil Nadu, is one of many global tech firms looking for opportunities in the country, particularly as multinationals seek to diversify their supply chains beyond China.

On Monday, India’s electronics and information technology minister Ashwini Vaishnaw told Indian news outlet and CNN affiliate News18 that both Vedanta and Foxconn are “completely committed to India’s semiconductor mission.”

Rajeev Chandrasekhar, the country’s minister of state for electronics and IT, also tweeted that the news “changes nothing about” India’s semiconductor manufacturing goals, adding that the decision would still allow “both companies to independently pursue their strategies” in India.

The project had been hailed as a milestone in India’s campaign to attract more investment in manufacturing, a sector sorely needed to help ease unemployment.

Prime Minister Modi had framed the project as a significant boost for the economy and jobs.

Foxconn shares rose 1.3% in Taipei on Tuesday following its announcement, while Vedanta’s shares fell 1.4% in Mumbai. The latter has not responded to a request for comment.

Other prominent tech companies have moved to expand production in India recently.

Last month, US chipmaker Micron (MICR) announced a new factory in the western state of Gujarat, calling it the country’s first semiconductor assembly and test manufacturing facility.

The venture will see Micron invest up to $825 million, and create “up to 5,000 new direct Micron jobs and 15,000 community jobs over the next several years,” according to the company. (CNN)

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