L&T's Rs 830cr fabless chip design facility big boost to India's semiconductor dream

New Delhi: As India doubles down on local semiconductor design and manufacturing, the engineering major Larsen & Toubro (L&T) has announced to invest up to Rs 830 crore to build a fabless semiconductor chip design subsidiary which will ramp up the country's plan to become a semiconductor hub.

During the company's quarterly earnings call, R. Shankar Raman, L&T's Chief Financial Officer, said that the company 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," Raman added.

The company's board has approved the creation of a wholly-owned subsidiary that will be involved in fabless chip design.

According to industry experts, L&T's strategic move into fabless semiconductor chip design marks a significant shift in its business focus.

"In a rapidly evolving market landscape, the move capitalises on the potential for creating patented fabless chip designs, emphasising the value of intellectual property in a high-demand market," Prabhu Ram, Head–Industry Intelligence Group, CMR, told IANS.

If executed well, L&T is potentially well-poised to make a substantial impact in the competitive semiconductor landscape, he added. L&T has said that its strategy is to focus on the "low investment" part of the supply chain.

"We believe it will take a lot to compete in the (semiconductor 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.

The government is currently considering 10 applications by the semiconductor manufacturers under the Rs 76,000 crore incentive scheme. Two of these proposals are for setting up silicon fabs, three for compound semiconductor fabs and five for packaging chips. A fabless semiconductor company specialises in the design and creation of semiconductor chips, without manufacturing facilities.

Last month, the India Semiconductor R&D Committee handed over the report on the India Semiconductor Research Centre (ISRC) to the IT Ministry, which will be a core institution in India's growing capabilities in semiconductors.

The ISRC will be the Indian equivalent of Europe-based Interuniversity Microelectronics Centre (IMEC), Nano Tech, Taiwan-based Industrial Technology Research Institute (ITRI) and MIT Micro-electronic labs in the US which have pioneered many cutting-edge technologies, according to Rajeev Chandrasekhar, Union Minister of State for Electronics & IT.

"After being absent from the semiconductor ecosystem for decades and missing many opportunities, we are now playing catch up," said Chandrasekhar.

By fostering collaboration between industry, academia, and government, ISRC aims to nurture a vibrant semiconductor ecosystem.

It is expected to facilitate seamless transfer from lab to fab, bridging the gap between research and manufacturing. In December 2021, the government committed Rs 76,000 crore to catalyse the semiconductor manufacturing ecosystem in India.

In just 15-16 months' time, India has seen the construction of its first-ever semiconductor plant in Gujarat (US-based Micron), received more manufacturing proposals along with 8 chip designing startups now operational in the country.