Exclusive | Zoho CEO Sridhar Vembu confirms reports of foray into semiconductor fabs

Chennai-based tech giant Zoho Corp has applied to initiate semiconductor fabrication (fab) production in India under the India Semiconductor Mission, co-founder and CEO Sridhar Vembu confirmed. In an exclusive conversation with CNBC-TV18 during Zoho's tech conclave, Zoholics, in Austin, Sridhar emphasised India's need for more fab units.

"I have always advocated for more semiconductor fab units across India," Sridhar stated. "We are aware of the stringent evaluation criteria for establishing such units. We have filed an application and will make an announcement once the process is complete."

Last month, CNBC-TV18 quoted sources while reporting that Zoho had initiated plans to begin semiconductor production in the country. The company did not respond to or comment on the development. CNBC-TV18 now learns that semiconductor production isn't the only foray into the hardware segment that Zoho is planning and executing.

"We have started a hardware division for data centres in Nagpur," said Sridhar, "We have just started production, and we will begin deployment soon; we are focusing on B2B hardware production now, we hope to follow that up consumer hardware production too." Recently, Zoho began manufacturing medical instruments under its subsidiary V-Titan, which it has deployed in rural markets.

For over two decades, Zoho has developed CRM (Customer Relationship Management) products for global companies. Recently, Zoho launched "CRM For Everyone," a product designed to democratise CRM workflows, allowing more teams to engage in CRM activities, complete with an AI interface.

'Slower growth for Zoho this fiscal'

Sridhar predicted a slowdown in Zoho's growth this fiscal year, from 30% in FY24 to between 17-20%. "We expect the SAAS market to grow at a much slower rate," he said, citing an oversupply issue in the SAAS industry.

"Salesforce's earnings warning should remind us that there is overcapacity in the SAAS ecosystem," he explained, "Customers are fatigued with too many SAAS tools being produced." Earlier, at a keynote speech to partners, customers and analysts, Sridhar reiterated the warning, saying that too many SAAS software was being sold while quoting studies by US-based software firm, Flexera, on the subject.

However, the good news for Zoho is that the company has reported a rise in customer acquisition numbers. "We are seeing an increase in customer count despite SAAS revenues falling across the world," said Sridhar, "We are on-boarding 32,000 new organisations every month, across the world; we have plans to on-board one million organizations as Zoho customers in the next two years."

'Will invest in R&D-driven rural start-ups'

The customer growth spurt comes on the back of Zoho's enhanced growth in the global south, especially in markets like India, Middle East, Latin America and Africa. Along the way, Sridhar and Zoho have invested in promising rural start-ups in India as well. His latest investments have been in long-range drone start-up Yalli Aerospace and power-tools technology start-up Karuvi.

"We decided to invest in Yalli Aerospace because of its use-case in drone deliveries — they build winged, long-range drones to execute delivery of medicines from one city to another," he said, "We invested in Karuvi as a fun challenge, to see if we could create a manufacturing ecosystem for power tools." CNBC-TV18 learns that Karuvi could open a power-tool plant in Tenkasi, Tamil Nadu, with support from Zoho.

Sridhar said that he plans to invest in a lot more start-ups, and is on the look-out for opportunities with a small list of requirements: "We want to invest in start-ups that are R&D-driven, fit with our culture and have a rural connect." He added: "We are not a traditional VC; we want founders who are committed to their companies and are not exit-centric."

'Optimistic about political stability in India'

Sridhar also reserved special praise for Prime Minister Narendra Modi, on the latter's third successive term in office. "The election results have meant that all the critics who cried 'dictatorship' and kept talking about 'election interference' have nothing to say now," he said, "I wish the results were better, but I'm proud of our democracy and that so many people voted."

He added that he was optimistic about another full term for the NDA, coalition politics notwithstanding. "India is a huge nation and we have seen much worse times in the past when it comes to political stability," he said, "I'm happy that Chandrababu Naidu is back in power in Andhra Pradesh, and I'm optimistic that political stability will continue."