Zoho Corporation drops $700m chipmaking venture, including $400m Karnataka facility, over lack of tech partner: Report

Information technology company Zoho Corporation has suspended its $700 million plan to venture into chip manufacturing, as it struggled to find the right technology partner to advise on the complex chipmaking processes, news agency Reuters reported, citing sources.

Zoho had planned to invest $400 million in a semiconductor facility in Karnataka.

Zoho Corporation’s co-founder, Sridhar Vembu, has said that the technology is vital for the nation.

“Zoho could not find a tech partner despite an extensive search,” said one of the sources.

Last December, the Karnataka government announced that it had granted landmark approval to Zoho Corporation’s planned $400 million semiconductor facility in the Mysuru region. The project was expected to generate 460 jobs and would have been the first of its kind in the state.

The software firm, valued at around $12 billion, offers affordable alternatives to cloud-based software tools developed by companies like Microsoft.

Vembu is known for his popular and unconventional approach of locating business operations in rural villages.

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

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, Reuters reported on Wednesday.

Sridhar Vembu warns of fundamental reckoning in India’s software industry

In April, Vembu had sounded an alarm about the future of India’s software and IT services sector, arguing that the industry is facing a fundamental reckoning—not just a cyclical downturn or a challenge from artificial intelligence, but a structural shift that will reshape the next several decades.

In a post on social media platform X, Vembu had contended that inefficiencies in products and services have long plagued the global software industry.

“My operating thesis: what we are seeing is not just a cyclical downturn, and it is not just AI-related. Even without the uncertainty induced by tariffs, there was trouble ahead.

“The broader software industry has been quite inefficient, both in products and services. These inefficiencies have accumulated over decades of a prolonged asset bubble,” Vembu, who stepped down as CEO of the IT firm in January to focus on R&D, wrote.

He noted that India, as a major exporter of software and IT services, has adapted to and even relied on these inefficiencies, with millions of jobs tied to the sector’s continued expansion.