Zoho to venture into semicon manufacturing with $700Mn investment: Report

Indian SaaS major Zoho, has set its sights on an entirely new frontier: chip manufacturing. According to a Reuters report, this endeavour is backed by a proposed investment of $700 million, and the startup is already seeking support and incentives from the government.

At the heart of the Chennai-based Zoho’s proposal lies the production of compound semiconductors. Unlike conventional chips fabricated from silicon, compound semiconductors are engineered using a combination of elements, allowing for specialized properties and functionalities. These chips hold immense potential for various commercial applications, particularly in sectors like power electronics, radio frequency devices, and advanced optoelectronics.

The Indian government, through the Ministry of Electronics and Information Technology (MeitY), is currently evaluating Zoho’s proposal. From the looks of it, MeitY is interested in understanding Zoho’s target clientele for these compound semiconductors and the broader impact the company’s entry into this sector might have on the domestic chip ecosystem. While Zoho has maintained official silence regarding the specifics of its plan, Zoho is believed to have secured a strategic partnership with a technology company to establish the chip manufacturing operations from the ground up.

Zoho’s foray into compound semiconductors comes at a time when the Indian government is actively pushing for domestic chip production. The Indian semiconductor market is projected to reach a staggering $63 billion by 2026, and recognizing this potential, the government has unveiled a $10 billion incentive package designed to propel India into the ranks of leading semiconductor manufacturers, currently dominated by countries like Taiwan. Zoho’s proposal, if approved, could act as a catalyst for this ambitious goal.

This development comes at a time when the government is pending its approval for three new semiconductor plants, representing over $15 billion in investments from conglomerates like Tata Group and CG Power.

Currently, India relies heavily on imports for its semiconductor needs. Domestic production accounts for a meager portion of the total chip consumption. Zoho’s entry, if successful, could significantly boost domestic chip production, reducing dependence on foreign suppliers and potentially lowering chip prices for Indian consumers. If successful, Zoho’s multi-million-dollar foray into chipmaking could significantly bolster India’s domestic chip production capabilities, reduce reliance on foreign imports, and position the country as a more prominent player in the global semiconductor market. It could also spur innovation in chip design and fabrication technologies within India, eventually leading to the creation of new chip solutions tailored to specific domestic needs and applications.

Speaking more about Zoho, the startup, ever since its establishment in 1996, has built a strong reputation for its cloud-based software solutions, catering to a global clientele across 150 countries. The company’s core offerings compete directly with established giants like Microsoft and Salesforce, highlighting its position as a major player in the software-as-a-service (SaaS) domain. Earlier this year, Zoho CEO Sridhar Vembu hinted at a chip design project in Tamil Nadu, offering the first glimpse into the company’s potential foray into hardware development. Zoho’s financial performance strengthens its case for venturing into chipmaking. The company boasts annual revenues exceeding $1 billion, providing the necessary financial muscle to compete in this capital-intensive industry.