According to a source familiar with the matter, Zoho encountered difficulties in identifying a suitable technology partner to provide guidance on the intricate processes involved in chipmaking. This challenge ultimately led to the suspension of the project.
Sridhar Vembu, Zoho's billionaire co-founder known for his unconventional approach of locating business operations in rural India, corroborated the report on social media, stating, "we did not have that confidence in the tech." He further elaborated on the cautious approach, emphasizing the significant capital investment required for semiconductor manufacturing and the necessity of government backing. "Since this business is so capital intensive, it requires government backing, we wanted to be absolutely sure of the technology path before we take taxpayer money," Vembu explained.
Zoho, valued at approximately $12 billion and a competitor to major cloud-based software providers like Microsoft, had outlined plans to invest $400 million in establishing a semiconductor fabrication unit in the southern Indian state of Karnataka as part of its diversification strategy. However, the entirety of this chip manufacturing endeavor, initially reported in May 2024, has now been suspended. Representatives from the Karnataka state government have yet to comment on the matter.
Zoho's decision to halt its chipmaking ambitions will undoubtedly be a disappointment for Prime Minister Narendra Modi, who has been actively pursuing foreign and domestic investment to transform India into a significant player in the global semiconductor supply chain. Currently, India lacks any operational chip manufacturing facilities.
Established in 1996, Zoho provides a range of software and related subscription services to businesses across 150 countries, boasting a workforce of over 18,000 employees and a user base exceeding 120 million. Last year, Zoho's dedicated semiconductor arm, Silectric Semiconductor Manufacturing, reportedly made initial hires and formed a board to oversee its chipmaking efforts.
In December, the Karnataka government had announced its landmark approval for Zoho's $400 million facility in the Mysuru region, projecting the creation of 460 jobs and hailing it as the first project of its kind in the state. The suspension of this project underscores the complexities and challenges involved in entering the highly specialized and capital-intensive semiconductor manufacturing industry.