The chip packaging and testing venture, known as OSAT in industry lingo, comes after Foxconn abandoned a joint venture with India’s Vedanta in July.

Foxconn, also known as Hon Hai Precision Industry, said it is partnering with India’s HCL Group to start a chip packaging and testing venture in the country.

Foxconn Hon Hai Technology India Mega Development, a unit of the Taiwanese contract manufacturer, will invest $37.2 million for a 40% stake in the joint venture, a regulatory filing to Taiwan’s stock exchange said.

The chip packaging and testing venture, known as OSAT in industry lingo, comes after Foxconn abandoned a joint venture with India’s Vedanta in July. HCL Group previously said it was holding active discussions with the Karnataka state government to set up an OSAT facility.

“HCL Group has a strong engineering and manufacturing heritage and this is an opportunity that provides strategic adjacency to the Group portfolio,” a HCL Group spokesperson in a statement to Moneycontrol said.

The development comes just after it submitted a fresh application to establish a semiconductor fabrication unit in India under the “modified scheme for setting up of semiconductor fabs in India”, a government initiative aimed at boosting the electronics manufacturing sector in the country, including semiconductors. Rajeev Chandrasekhar, the Minister of State for Electronics and IT, disclosed this development to the Parliament.

The Ministry of Electronics and Information Technology (MeitY) is verifying Taiwanese contract manufacturer Foxconn’s application to set up a semiconductor factory in the country.

“Foxconn has to bring in technology. They have to establish that they have the technology to manufacture semiconductors. The process of verifying the technology and so on is currently underway at the ministry,” a government official said on the condition of anonymity.

Both developments come after its exit from a joint venture with the Vedanta Group, which had plans to set up a chip plant in Gujarat with an investment of around Rs 1.5 lakh crore.

Foxconn, the world’s largest assembler of iPhones and other electronics for global brands, is expanding in India as geopolitical tensions and economic uncertainty begin to disrupt its primary operations in China.

Foxconn has been India’s leading manufacturer of iPhones, contributing 68% of total production, followed by Pegatron at 18% and Wistron [Tata] at 14%. Foxconn exported nearly 58% of its total production of iPhones, while Pegatron and Wistron exported 80% and 96% of their iPhone production, respectively, from their India factories.

According to reports, Foxconn received approval to invest an additional $1 billion in a new plant to manufacture Apple products in India in December. This investment is in addition to the $1.6 billion they had already allocated for the 300-acre site near Bengaluru’s airport.

The bulk of this cumulative investment is for Apple in India. Bloomberg reported that Foxconn may use some investment to make devices and components, such as electric vehicle parts, for other customers.

Apple produced iPhones worth over Rs 1 lakh crore in India last year, having ramped up output sharply from the year before. Of this, made-in-India iPhones worth Rs 65,000 crore were exported from January to December.

Apple has exceeded the targets under the production-linked incentive (PLI) scheme, which may allow its contract manufacturers to get more residual incentives depending on the outlay, the Economic Times reported on January 9.