Larsen & Toubro, a leading engineering company, has announced its venture into fabless semiconductor chip design by establishing a wholly-owned subsidiary. The company's board has approved an investment of up to Rs 830 crore for this initiative. According to R Shankar Raman, L&T's Chief Financial Officer, the focus will be on designing fabless semiconductor chips, a strategic decision made due to the potential for patents and high value. Raman emphasized that L&T will concentrate on the design aspect, avoiding manufacturing due to intense competition from global players, particularly in China.

L&T's approach aims to address the low-investment segment of the supply chain, with a primary focus on designing automobile and industrial chips. Raman also mentioned the possibility of setting up a research and development centre for fabless semiconductor chips in the United States.

In the larger context, the Indian government is evaluating applications from chipmakers under a $10 billion capex-linked incentive scheme. Notably, major foreign companies like Intel, Samsung, and TSMC have not yet established a presence in India, despite substantial subsidy offers. In contrast, other advanced economies, such as the United States, Germany, the European Union, and Japan, have implemented significant subsidy programs to secure a larger share of the semiconductor market.

During Prime Minister Narendra Modi's recent visit to the US, Micron, a prominent semiconductor company, committed to building a $2.7 billion assembly plant in India. Gujarat's central and state governments will cover 70% of the project's cost through subsidies. Additionally, Applied Materials, a semiconductor equipment maker, plans to invest $400 million in designing chipmaking machinery in India, while Microchip Technology has committed to a $300 million investment to expand its semiconductor research and development activities in the country.

Source: Moneycontrol