The plans for manufacturing of semiconductors in India have suffered a major setback. Taiwan’s Foxconn has called off a more than $19 billion semiconductor joint venture with Vedanta, which has businesses ranging from metals to oil. Foxconn and Vedanta, which are major contract manufacturing companies, had signed an agreement last year to set up semiconductor and display manufacturing plants in Gujarat.

A statement issued by Foxconn said, “Foxconn has decided not to proceed with the joint venture with Vedanta.” The company said that it had worked with Vedanta for more than a year regarding this joint venture. However, both the companies have decided to end this joint venture with mutual consent. Foxconn told that Vedanta will now have full stake in it. Requests for comment sent to the country’s IT ministry and Vedanta did not elicit any response. Foxconn is the largest contract manufacturer of iPhone maker Apple.

Prime Minister Narendra Modi has given priority to chip manufacturing to strengthen the country’s position in electronics manufacturing. However, Foxconn’s withdrawal from this venture may make it difficult to bring in foreign investors for chip manufacturing in the country. Recently, American memory chip maker Micron Technology had said that it would invest $825 million in setting up a chip assembly and testing factory in Gujarat. This will be the company’s first factory in the country.

Micron had told that with the cooperation of the Central Government and the Government of Gujarat, there would be a total investment of $ 2.75 billion in this factory. Out of this, 50 percent will be received from the Central Government and 20 percent from the Gujarat Government. The construction of the factory is likely to begin this year and the first phase could start by the end of next year. About 5,000 jobs will be generated from this project. Due to the huge incentive for this project, it needed approval from the cabinet. The US government is encouraging chip-making companies to invest in India.