Foxconn, a provider of Apple, has withdrawn from a $19.5 billion agreement with Indian mining giant Vedanta to create a chip manufacturing facility within India.
This step occurs less than a year after the organizations declared intentions to construct the installation in the region of Prime Minister Narendra Modi in Gujarat.
Analysts have indicated that this marks a hindrance to the aspirations of the country's technology industry.
A government official has declared that the event will not interfere with the nation's ambitions to manufacture chips.
Foxconn, located in Taiwan, informed the BBC that they will now look into "seeking out various growth prospects".
The company further declared that the conclusion was reached in "unanimous agreement" with Vedanta, taking full control of the partnership, yet did not provide specifics as to why it pulled out of the agreement.
Foxconn declared that it will keep on vigorously assisting the government's 'Make in India' objectives and set up a variety of regional partnerships that fulfill the requirements of all concerned parties.
Vedanta, based in New Delhi, declared that they have arranged various associates to form India's initial chip foundry.
Paul Triolo of the Albright Stonebridge Group described the sudden withdrawal of Foxconn as a substantial setback for India's plans to become a major player in the semiconductor market in an interview with the BBC.
"The reason for the departure seems to stem from the lack of an obvious technological associate and route for the joint venture," he continued. "Neither company had meaningful know-how in constructing and managing a great semiconductor production business."
Nevertheless, Rajeev Chandrasekhar, India's Minister of State for Electronics and Information Technology, declared on Twitter that the move made by Foxconn had "no effect on India's semiconductor fabrication objectives. None at all."
Mr Chandrasekhar acknowledged Foxconn and Vedanta as "esteemed investors" in the nation and declared that they "shall now pursue their projects in India single-handedly".
The Indian government has been devising plans to back the chipmaking industry.
In an effort to be less dependent on international chipmakers, a $10bn fund was established last year in order to draw in more investors to the field.
Prime Minister Modi's 'Make in India' initiative, launched in 2014, is meant to convert India into a competing global manufacturing hub in opposition to China.
In the last few years, other companies have revealed intentions to construct semiconductor plants in India.
Last month, US-based memory chip giant Micron announced that it would expend up to $825m on the construction of a semiconductor assembly and test facility in India.
Micron announced that the building of a new facility in Gujarat is due to start this year. It is anticipated that this project will provide up to 5,000 direct job opportunities and lead to 15,000 more in the nearby region.
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