NEW DELHI, May 16 — Indian software firm Zoho is planning a foray into chipmaking and seeking incentives from the federal government, two sources with direct knowledge of the proposal said, with one of them pegging the investment plan at US$700 million (RM3.2 billion).

Zoho, established in 1996 and now headquartered in India’s Tamil Nadu, offers software and related services on subscription to businesses in 150 countries, competing with the likes of Microsoft and Salesforce.

It is the latest company to seek financial sweeteners from the government to set up a chip fabrication plant.

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Semiconductors are a key plank of India’s business agenda, with a US$10 billion package in place to boost the industry as it hopes to compete with countries such as Taiwan in a few years.

Zoho is proposing to manufacture compound semiconductors, which have specialised commercial applications and are made from alternatives to the more-commonly used silicon in chipmaking, the two sources said.

The proposal is being reviewed by the panel that drives India’s chip initiatives at the IT ministry, they added. The ministry has sought more clarity from Zoho on the customers it intends to do business with, the second source said.

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Zoho declined to comment, while the IT ministry did not immediately respond to a request.

The first source, who said the company had estimated an investment outlay of US$700 million, said Zoho had also identified a tech partner to help set up the operation from scratch, without naming the firm.

In March, founder and CEO Sridhar Vembu said Zoho was planning a chip design project in the southern state of Tamil Nadu, without providing further details. Its plans to diversify into chip manufacturing have not previously been reported.

Zoho made annual revenue of over US$1 billion in the financial year ended March 2023, according to media reports.

In February, India gave the go-ahead to construction of three semiconductor plants worth over US$15 billion by firms including Tata Group and CG Power, with plans to manufacture and package chips for sectors including defence, automobiles and telecommunication.

India has estimated its semiconductor market will be worth US$63 billion by 2026. — Reuters