Zoho shelves $700m chipmaking plan in new blow for India

New Delhi — Indian software company Zoho has suspended its year-long pursuit of a $700m plan to expand into chip manufacturing, its co-founder said on Thursday, dealing another blow to the Indian government’s plans for a semiconductor industry.

Zoho struggled to find the appropriate technology partner required to advise on complex chipmaking processes, one source familiar with the matter said.

Reuters reported on Wednesday that Indian billionaire Gautam Adani’s group also paused discussions with Israel’s Tower Semiconductor for its $10bn chip project after an internal evaluation by the Indian group.

Zoho, valued at about $12bn, offers cheaper alternatives to cloud-based software tools made by the likes of Microsoft. Its billionaire co-founder Sridhar Vembu is known for his popular and unconventional approach of locating business operations in rural villages.

Vembu confirmed the decision after the story was published, saying in a social media post: “We did not have that confidence in the tech.

“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.”

In May last year, a source with direct knowledge of the proposal said Zoho’s India investment plan was worth $700m. 

In a bid to diversify, Zoho had previously planned to invest $400m in a semiconductor facility in Karnataka state in south India.

The entire chipmaking plan, first reported in May 2024, has for now been suspended, two sources familiar with the matter said earlier, declining to be identified.

Representatives for Karnataka state did not respond to a request for comment.

Zoho’s retreat will be a setback to Prime Minister Narendra Modi who has for several years tried to lure companies in his pursuit to make India a global chip manufacturing hub.

India does not have a single operational chipmaking facility.

Zoho, established in 1996, offers software and related services on subscription to businesses in 150 countries and has more than 18,000 employees and more than 120-million users.

Zoho’s Silectric Semiconductor Manufacturing last year hired a handful of staff and formed a board to oversee chipmaking efforts, the source who gave the reason for the failed plan said.

The Karnataka government said in December it had given approval to Zoho’s planned $400m facility in Mysuru region, which would have generated 460 jobs and been the first such project in the state.

Reuters