Larsen & Toubro is foraying into fabless semiconductor chip design by setting up a subsidiary, the engineering major said on October 31.
The company’s board has approved incorporation of a wholly-owned subsidiary to engage in the business of fabless semiconductor chip design and product ownership with an investment of upto Rs 830 crore.
“We will get into design for fabless semiconductor chips. We have decided to stay at the design end because it can be patented and will be most valuable,” R Shankar Raman, L&T's chief financial officer said in a conference call to reporters after the company announced financial results for the second quarter of 2023-24.
He said that the company’s strategy is to focus on the “low investment” part of the supply chain. It does not plan to get into manufacturing given how competitive global manufacturers, especially those in China, are.
"We believe it will take a lot to compete in the (semi-conductor chip) manufacturing space with the likes of Chinese, Taiwanese, and Korean companies, so that is not an area we are targeting at the moment," Raman said.
He added that the COVID-19 pandemic has highlighted the impact a semiconductor shortage can have on the manufacturing industry and the economy as a whole.
"We are mostly focused on designing automobile and industrial chips, at the moment it will be less investment, low manufacturing, but getting our positioning accessed for the design (of semi-conductor chips)," Raman added.
Raman said that the company may set up a research and development center for fabless semiconductor chips that may be in the US.
The Indian government is currently considering 10 applications by chipmakers under a $10 billion capex-linked incentive scheme, with two of the proposals being for silicon fabs, three for compound semiconductor fabs, and five for packaging chips.
Vedanta and Foxconn have submitted separate applications to set up fabs in India. However, both are now looking for technology partners before moving forward, and the government is currently reviewing their proposals.
The curtain-raiser for the next edition of the annual semiconductor conference was held in Bengaluru on September 13.
The last edition of the conference was held in Gandhinagar, Gujarat in August and was led by the Central government.
The next edition of the event, which will be held in September 2024 in New Delhi, will be led by chip industry body SEMI (Semiconductor Equipment and Materials International).
Despite offering large subsidy schemes, the government has not yet been able to attract any major foreign companies like Intel, Samsung, or TSMC to the country.
This is at a time when advanced economies like the United States, Germany, the European Union, and Japan have also announced large subsidy programmes in a global race to secure a larger share of the semiconductor market.
During Prime Minister Narendra Modi's visit to the US a few months ago, semiconductor major Micron committed to establishing a $2.7 billion assembly plant in the country. According to estimates, the central and state governments of Gujarat will jointly cover 70 percent of the project's cost in the form of subsidies.
Additionally, semiconductor equipment maker Applied Materials has said it would invest $400 million to design chipmaking machinery in the country. Microchip Technology has also committed to investing $300 million to expand its semiconductor R&D footprint in India.
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