Foxconn has pulled out from a $19.5 billion semiconductor joint venture with Vedanta Ltd in a blow to Prime Minister Narendra Modi’s chipmaking plans for India.

In a statement on Monday, Foxconn said: “In order to explore more diverse development opportunities, according to a mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta.”

Foxconn said it is “working to remove the Foxconn name from what now is a fully-owned entity of Vedanta”.

“Foxconn has no connection to the entity and efforts to keep its original name will confuse future stakeholders,” Hon Hai Technology Group (Foxconn) said.

The statement said that for over a year, Hon Hai Technology Group (Foxconn) and Vedanta have worked hard to bring a great semiconductor idea to reality. It has been a fruitful experience that can position both companies strongly going forward.

“Foxconn is confident about the direction of India’s semiconductor development. We will continue to strongly support the government’s ‘Make In India’ ambitions and establish a diversity of local partnerships that meet the needs of stakeholders,” it said.

Taiwan’s Foxconn is the world’s largest contract electronics maker.

A source familiar with the matter said concerns about incentive approval delays by India’s government had contributed to Foxconn’s decision to pull out of the venture. New Delhi had also raised several questions on the cost estimates provided to request incentives from the government, the source added.

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.

Agarwal’s metals-to-oil conglomerate responded by saying it was “fully committed to its semiconductor fab project and we have lined up other partners to set up India’s first foundry.” It, however, did not give details of the new partners.

Foxconn, best known for assembling iPhones and other Apple products, and Vedanta last year signed a pact to set up semiconductor and display production plants in Gujarat.

European chipmaker STMicroelectronics was being roped in as a technology partner for the venture but talks were deadlocked.

Just last week, Vedanta announced that it will acquire the semiconductor and display glass units from group company Twin Star Technologies Ltd. This deal falling through is a setback for the ‘Make in India’ push,” said Neil Shah, vice-president of research at Counterpoint, adding that it also does not reflect well on Vedanta and “raises eyebrows and doubts for other companies”.

India’s deputy IT minister Rajeev Chandrasekhar said Foxconn’s decision had “no impact” on India’s plans, adding that both companies were “valued investors” in the country. He said it was not for the government to “get into why or how two private companies choose to partner or choose not to”.

With inputs from Reuters