Zoho earmarks $200 mn for semiconductor fab, applies for licence

Austin, Texas/New Delhi: Chennai-based Zoho Corp. has applied for a licence to build a compound semiconductor fabrication plant, or fab, besides earmarking $200 million for the project, the company said on Thursday. 

According to two senior industry officials familiar with the matter, the Zoho compound fab project could attract around $600 million in net investment, and will involve a technology partner.

“We have applied for the licence and are awaiting government clearance. We will make a formal announcement once we get the approvals,” said Sridhar Vembu, cofounder and chief executive, Zoho Corp, on the sidelines of the company’s annual event in Texas, US. 

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Zoho is “hoping that the government will also finance the project equally under the compound semiconductor manufacturing scheme,” Vembu added. 

According to one of the officials cited above, Zoho's fab project aims to bring Silicon carbide (SiC) chip manufacturing to Tamil Nadu. The company plans to license the technology from Scotland-headquartered Clas-SiC, he said, seeking anonymity.

Subsidies for compound semiconductor fabs are part of the government's programme to develop the semiconductor and display manufacturing ecosystem in India. The programme guidelines were modified in June 2023. Under the scheme, applicants for a fab can receive fiscal support of 50% of their capital expenditure, provided they meet a "threshold value" for the capex.

Silicon carbide compound chips are used for various industrial applications, including in electric vehicles (EVs). In October, Vembu had told Mint that the company is looking to invest in advanced chemistry cells—the core component of batteries used in electronics and EVs. 

“We are looking at this space and are in talks with some stakeholders. It’s too early to announce, but we need to build deep tech and manufacturing capabilities in India. There is scope here, too, with advanced cell chemistry production-linked incentive (PLI) schemes. We need good people with experience in cell R&D, and we’re talking to some right now,” Vembu had said.

The two initiatives are likely linked, the second official said also seeking anonymity. Zoho did not respond to queries till press time. 

Emailed queries to Clas-SiC did not elicit any response till press time.

Zoho the third company to apply for the licence

Zoho is the third company to apply for a licence, followed by SiCSem, a subsidiary of Chennai-based Archean Chemical Industries, and RIR Power Electronics, the local arm of US-based chip manufacturer Silicon Power Group.

On Wednesday, Zoho also announced the revamp of one of its primary revenue source, Zoho CRM, amid slower growth in its key US market. The updates include AI-powered CRM analytics and support for businesses to use open-source AI models.

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Zoho’s global growth has slowed after reaching an annual revenue run-rate of $1 billion in November, chief executive Sridhar Vembu said on the sidelines of a company event in Austin, Texas. Revenue run-rate is an indicator of future performance extrapolating from current revenue.

With its new software, Zoho is looking to undercut established enterprise tech companies, including US-based ServiceNow Inc. and Salesforce Inc., Vembu added.

The global CRM market was valued at $89 billion in FY24, according to market researcher Statista. Salesforce commands the largest market share at 22%, while Microsoft Corp., Adobe Inc., SAP SE, and Zoho have a global market share of 3-5%, each.

Zoho’s new suite, CRM for Everyone, will allow sales teams to implement customised modifications for other teams, including solutions engineering, contract management, customer onboarding, and advocacy. 

The new features will “improve visibility for every stakeholder” and reduce turnaround times in customer queries—a critical factor in the CRM industry, Zoho said. “Traditionally, the CRM system has been built by IT and built for sales workflows,” said Mani Vembu, chief operating officer, Zoho.

“Over the years, it has accumulated a wealth of customer context, but access to the CRM is strictly rationed, and teams are forced to operate on their islands with limited context. We are looking to break down these silos... enabling different teams in a sales process to contribute by reducing CRM complexity.”

Zoho, however, isn't adopting widespread AI integration, a trend that's been picking up in enterprise software since the public launch of OpenAI's ChatGPT in November 2022. “Zoho prefers contextually integrating AI tools and solutions into its CRM suite instead of using a broad-based approach,” Sridhar Vembu said. 

On Wednesday, Zoho said its enterprise clients will be able to integrate open-source AI models and build generative AI solutions on top of its CRM suite. Zoho is also working on developing its AI security models to ramp up data security, Vembu said. This will “allow customers to refine and create their own models, ensuring complete data privacy.”

“We will train on publicly available data, and the customer data will be put to use only for their own purpose,” Vembu said, adding that the company does not monetise customer data.

The AI-powered security models, however, are not ready to be unveiled and are still in the works, said Raju Vegesna, Zoho’s chief evangelist. Zoho has about 1,000 employees working on the feature.