What may have prompted Foxconn to pull out of chipmaking joint venture with Vedanta

On Monday, Taiwanese electronics manufacturing giant Foxconn announced that it is withdrawing from the $19.5 billion joint venture with Vedanta Ltd to set up semiconductor and display production plants in Gujarat.

"In order to explore more diverse development opportunities, according to mutual agreement, Foxconn has determined it will not move forward on the joint venture with Vedanta," the company had said in a statement.

The ambitious joint venture, which had the blessings of the Centre and Gujarat government, got cancelled less than a year after it was finalised. The two companies did not offer a reason for the withdrawal.

There were reports that due to differences in rollout strategies, the joint venture wasn't witnessing much progress. On Tuesday, a Reuters report said the Indian government and Foxconn had concerns over the financial situation of the Anil Agarwal-owned Vedanta, and this has led to the Taiwanese company deciding to junk the joint venture.

Vedanta Ltd's London-based parent company, Vedanta Resources has been facing a debt crisis. According to Reuters, a few rating agencies have downgraded Vedanta Resources over concerns of a possible debt default.

Meanwhile, there were also reports that said delays by the Union government to grant incentive approval for the project may have also prompted Foxconn to cancel the deal. Centre had reportedly raised questions over Vedanta's applications for an incentive scheme for chip production. The venture's application seeking financial assistance reportedly did not meet the criteria of the government.

A news report also said the cultural differences in the approach of Vedanta and Foxconn may also have a role in the decision.

Even as the Centre clarified that cancellation of the joint venture has no impact on India's semiconductor fabrication plant goal, Foxconn on Tuesday said it is working on plans to apply for incentives under semiconductor and display fab programme, as the contract manufacturer pledged its commitment to India.

"We welcome a diverse set of stakeholders, both inside India and abroad, who also want to see India get to the next level and can complement Foxconn's world-class supply chain management and manufacturing efficiency," Foxconn said in a statement.

The company said it is "working toward submitting an application related to Modified Programme for Semiconductors and Display Fab Ecosystem."

"Foxconn has sound channels of communications with government stakeholders across India, and we have been consistent and clear with them at all levels about our continued commitment to invest in India," it said.