L&T to Invest ₹830 Crore in Fabless Semiconductor Venture

Defense News ,India :- Larsen & Toubro (L&T) has received board approval for the establishment of a wholly-owned subsidiary with an investment of ₹830 crore, marking the company's foray into the fabless semiconductor chip design industry. This move follows the footsteps of other major Indian conglomerates like Vedanta, Tata, and the Hiranandani groups, who have also ventured into the semiconductor sector.

L&T's strategic decision involves focusing on fabless chip design rather than semiconductor manufacturing. The Chief Financial Officer, R. Shankar Raman, announced the board's approval during the second-quarter financial results call.

What Is Fabless?

A fabless semiconductor company specializes in designing and creating semiconductor chips without owning or operating semiconductor manufacturing facilities, known as "fabs" or fabrication units. This cost-efficient approach involves subcontracting the manufacturing process to specialized foundries, allowing these companies to concentrate on chip design and marketing. Well-known global fabless companies include NVIDIA, Qualcomm, and MediaTek.

Why Fabless?

L&T acknowledges its focus on the low-investment segment of the chip supply chain, avoiding direct competition with Chinese, Taiwanese, and South Korean companies initially. The decision to start with semiconductor design is well-considered, considering the challenges faced by other conglomerates in locking in technology partners.

Additionally, the semiconductor manufacturing ecosystem demands substantial investments. Setting up a silicon semiconductor fab can range from $3 billion to over $20 billion, depending on the nanometer. L&T's decision aligns with the industry trend, as it recognizes the challenges and prerequisites of participating in the Indian government's ₹76,000 crore semiconductor scheme.

Furthermore, India boasts a significant talent pool of around 125,000 engineers with expertise in chip design and development, making it a favorable environment for semiconductor ventures. Many leading global fab and fabless companies, including Intel, NXP, Global Foundries, Samsung Semiconductor, Micron, Qualcomm, and MediaTek, have established their R&D centers in India.

The Agility of the Fabless Model:

The fabless model offers increased agility and responsiveness to market demands. With the continuous evolution of technology, fabless companies can adapt more easily without the long lead times and constraints associated with operating their fabs. This strategic move positions L&T to capitalize on India's talent pool and navigate the dynamic semiconductor landscape efficiently.