By Munsif Vengattil and Sai Ishwarbharath B
NEW DELHI (Reuters) -Indian software firm Zoho has suspended its year-long pursuit of a $700 million plan to expand into chip manufacturing, its co-founder said on Thursday, confirming a Reuters story and dealing another blow to the Indian government’s semiconductor plans.
Zoho struggled to find the right technology partner required to advise on complex chipmaking processes, one source familiar with the matter told Reuters earlier.
Reuters reported on Wednesday that Indian billionaire Gautam Adani’s group has also paused discussions with Israel’s Tower Semiconductor for its $10 billion chip project following an internal evaluation by the Indian group.
Zoho, valued at around $12 billion, 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 Reuters story was published, saying “we did not have that confidence in the tech,” in a social media post.
“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,” he said.
In a bid to diversify, Zoho had planned to invest $400 million in a semiconductor facility in Karnataka state in south India.
The entire chipmaking plan, first reported by Reuters in May 2024, has for now been suspended, two sources familiar with the matter told Reuters earlier, declining to be named.
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 over 18,000 employees and more than 120 million users.
Zoho’s Silectric Semiconductor Manufacturing last year made a handful of hires 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 landmark approval to Zoho’s planned $400 million facility in Mysuru region, which would have generated 460 jobs and been the first such project in the state.
(Reporting by Munsif Vengattil and Sai Ishwarbharath B; Editing by Aditya Kalra, Elaine Hardcastle and Mark Potter)