Hon Hai Precision (Foxconn) withdrew from a joint venture with Indian conglomerate Vedanta Group to build semiconductor and display production plants in the country, in a blow to the state’s plans to bolster the segment.

In a brief statement, Foxconn said it had worked with Vedanta for more than a year to bring “a great semiconductor idea to reality”, but it had determined not to move forward. It has also removed its name from an entity that is now fully owned by Vedanta.

The companies agreed a pact last year to set up plants in a joint venture worth $19.5 billion in Gujarat, the home state of Prime Minister Narendra Modi, who has made the country’s chip sector a key priority to boost economic growth.

Foxconn’s reasons for withdrawing are not yet known, however Bloomberg reported at the end of May that the government was mulling blocking access to a state incentive scheme because the joint venture did not qualify for funding.

According to Bloomberg sources, the venture’s application for incentives did not meet certain criteria, even though Vedanta was one of 16 companies selected to receive funding as part of a INR450 billion ($5.4 billion) government scheme introduced in late 2020.

Foxconn’s withdrawal comes after US-based Micron revealed plans last month to invest $825 million in a new chip assembly and test facility, also in Gujarat.