With the rising demand for AI chips, Zoho, a prominent Indian software company renowned for its suite of software and online business solutions, is gearing up to jump into the fray of domestic chip manufacturing. According to Reuters, which cites two sources familiar with the matter, Zoho is in discussions with the Indian government, aiming to secure incentives for its venture, one of which involves a substantial investment of $700 million.

Fueled by the surge in generative AI, the global demand for AI chips has prompted governments, such as the United States, to allocate billions in grants and incentives to support tech firms in meeting this growing need. Zoho is the latest tech company to seek financial help from the government to set up a chip fabrication plant.

India has set its sights on bolstering its semiconductor industry, aiming to rival tech powerhouses like Taiwan. A $10 billion package is poised to catalyze this ambition, with a focus on fostering semiconductor manufacturing within the country.

Sources familiar with the matter reveal that Zoho, the software giant, is stepping into the semiconductor arena. Their proposal centers on the production of compound semiconductors, which boast specialized applications and diverge from the conventional silicon-based chip technology, Reuters reported.

This initiative is currently under review by the panel overseeing India’s chip endeavors at the IT ministry. However, the ministry is seeking additional clarity from Zoho regarding the prospective clientele for these compound semiconductors.

While Zoho declined to comment on these developments, the IT ministry has yet to respond to inquiries.

According to the first source, Zoho anticipates an investment of approximately $700 million for this venture. Additionally, the company has identified a technology partner to facilitate the establishment of this operation, although the partner remains undisclosed.

Earlier this year, Zoho’s founder and CEO, Sridhar Vembu, hinted in a post on X that the company was planning a chip design project in Tamil Nadu, but did not provide specifics. This venture into chip manufacturing marks a significant diversification for Zoho, a company founded in 1996 and headquartered in Tamil Nadu, India.

I know how hard Ananthan has worked for Tenkasi. Great to see his grace and humility, along with his discipline and loyalty to his cause. 🙏

We have been planning a semiconductor design project in Tenkasi. Ananthan’s expertise in this field is unrivalled and we will work… https://t.co/XH3WCrRndg

— Sridhar Vembu (@svembu) March 22, 2024

Founded in 1996, Zoho’s core business revolves around providing subscription-based software and services to enterprises across 150 countries. With this bold leap into semiconductor manufacturing, Zoho aims to carve out a new frontier in the global tech landscape, challenging established players like Microsoft and Salesforce. The Indian software giant is one of the few startups to achieve unicorn status without external funding.