Foxconn backs out of agreement to establish manufacturing plant in India

• Foxconn will not establish a chip manufacturing plant in India.
• The decision is a setback for India’s ambitions in the semiconductor sector.
• The government minister says it won’t have any effect on India’s plans to produce chips.

Supplier to Apple Foxconn has backed out of a $19.5 billion (£15.2 billion) agreement with Indian mining company Vedanta to establish a chip manufacturing plant in India.

The decision was made less than a year after the businesses revealed their intentions to build the plant in Gujarat, the home state of Prime Minister Narendra Modi.

According to some commentators, it represents a setback for the country’s ambitions in the technological sector.

A government minister claims that it won’t have any effect on the nation’s plans to produce chips.

“There was recognition from both sides that the project was not moving fast enough,” Taiwan-headquartered Foxconn said in a statement.

“There were challenging gaps we were not able to smoothly overcome, as well as external issues unrelated to the project,” the firm added.

In a statement to the British news agency earlier on Tuesday, Foxconn claimed that the choice had been made in “mutual agreement” with Vedanta, which has taken full ownership of the business.

It added that it would “continue to strongly support the government’s ‘Make in India’ ambitions”.

New Delhi-based Vedanta said it had “lined up other partners to set up India’s first [chip] foundry”.

“The surprise pull-out of Foxconn is a considerable blow to India’s semiconductor ambitions,” Paul Triolo from global advisory firm Albright Stonebridge Group told the media.

“The apparent cause of the pull-out is the lack of a clear technology partner and path for the joint venture,” he added. “Neither party had significant experience with developing and managing a large-scale semiconductor manufacturing operation.”

Foxconn’s decision, according to India’s Minister of State for Electronics and Information Technology Rajeev Chandrasekhar, had “no impact on India’s semiconductor fab[rication] goals. None.”

Foxconn and Vedanta, who he described as “valued investors” in the nation, “will now pursue their strategies in India independently,” according to Mr. Chandrasekhar.

The Indian government has been developing plans to aid the chip manufacturing sector.

In an effort to become less dependent on foreign chipmakers, it established a $10 billion fund last year to entice new investment to the industry.

The main “Make in India” initiative of Prime Minister Modi, which was introduced in 2014, aims to make India a worldwide manufacturing powerhouse to compete with China.

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