Zoho suspends $700 million semiconductor fab investment plan; here's why

Indian SaaS giant Zoho Corporation has shelved its ambitious $700 million semiconductor fab investment plan, citing concerns over the underlying technology and the need for caution when seeking government support for capital-intensive projects.

The decision marks a significant retreat from one of the most high-profile chip investment plans by an Indian SaaS giant, which is famous for having offices in villages.

The company had been evaluating a foray into chipmaking for over a year, during which it established a subsidiary—Silectric Semiconductor Manufacturing—and announced a $400 million fabrication facility in Karnataka.

The project, which had received in-principle clearance from the state government, was expected to create 460 jobs and position Mysuru as a new hub for India's nascent semiconductor ecosystem. But the plan has now been shelved.

No confidence in the tech: Vembu

"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," Sridhar Vembu, co-founder and chief scientist at Zoho, said in a post on X.

"We did not have that confidence in the tech so our board decided to shelve this idea for the time being, until we find a better tech approach," Vembu added.

On our semiconductor fab investment plan, 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.

We did not have that confidence in the tech so our board decided to shelve…

— Sridhar Vembu (@svembu) May 1, 2025

Vembu's confirmation came after a Reuters report claimed that Zoho struggled to find a credible technology partner to help navigate the intricate processes of semiconductor fabrication—an industry defined by complex supply chains, razor-thin margins, and significant barriers to entry.

A strategic retreat amid national aspirations

Zoho's withdrawal comes at a time when India is aggressively courting semiconductor investments to reduce its reliance on chip imports and position itself as a global electronics manufacturing hub.

Under the country's semiconductor incentive scheme, the government has pledged billions in subsidies to attract domestic and foreign players. Yet progress has been slow, and India still lacks an operational chip fabrication facility. Zoho's decision to exit chipmaking joins a broader trend of hesitancy among Indian corporates.

Recently, Gautam Adani-led Adani Group reportedly paused a $10 billion semiconductor project in partnership with Israel's Tower Semiconductor, also citing technology-related uncertainties. While both projects were part of India's broader push to develop a self-reliant semiconductor industry, the setbacks reveal the depth of the challenge.

Establishing a competitive fab not only requires capital and skilled labor but also long-term technology partnerships—often with global giants that hold the intellectual property and process expertise.