We need to create something that’s going to sustain us: L&T – ET Infra

Engineering major Larsen and Toubro (L&T) is following in the footsteps of other Indian conglomerates like Vedanta and Tata Group, foraying into fabless semiconductor chip design. The company plans to invest Rs 830 crore through a wholly-owned subsidiary which will be engaged in the business of fabless semiconductor chip design for the automotive as well as industrial sector. L&T chief financial officer, R Shankar Raman tells Kalpana Pathak and Romita Majumdar, that as part of the company’s strategic plan, it has always been looking for alternate sources of business for future. Edited excerpts:What is the strategy behind foraying into chip design?

We have formed a subsidiary called L&T semiconductor systems and solutions limited. This will be wholly owned by L&T and will focus on chip design. So the semiconductor industry, which is about $27 billion in India, in today’s terms is expected to be about $50 billion dollars by 2030 which is considerable in seven years. We have some domain expertise between L&T and LTTS to get started with chip design. We thought we will look at a design which is investment free, a fabless design, it will be an analog chip on that mature node. So we marked our area where we could have a chance of participating profitably in this industry. The end users will be automatically based on this chip design that we have chosen – automobile industry and industrial applications and then maybe some energy because we are in the field of energy. There is something on the energy transmission, energy load management, energy distribution management, which are all chip dependent.Will this be for domestic consumption?
Need is global. I think in India, most of the chips that are designed are directed by the global majors who choose, along with the designer, what chip they need to manufacture and push it back to India to do the backend designing. What we want to do is co-create this chip along with the customer. All automobile manufacturing headquarters, where product design gets decided, will be the area where we might have to workwith. So it could be India it could be overseas. I mean European cars, American cars, Japanese cars, all these will be the marketing hubs where we need to operate. But given the talent pool India has, the designing detailing will be done in India.Where will the design labs be located?
We are not getting into fab manufacturing. We are not going to put up a foundry, we are going to be only in design. There will be a design lab that we will have in India and in the US now depending on how things pan out if the clients are going to be in Japan, Europe, US etc. And if there is a requirement to work in close proximity to them. We might have to have workforce stationed in all of these places. But the bulk of the detailing of the chip design specifically agreed with the customer could be done in India because that’s where the talent pool is. And that talent could also be a little more affordable than a European or an American talent.

Your infra order book is at its highest. Do you have enough manpower to work on these projects?
This is something that is keeping us awake. Winning orders is one thing but to deliver in time within costs and all of that, is another. We cannot slip on time, on client commitments and on execution. Between the last 12 months, that is September 22 to September 23, we have added almost 10,000 people to our workforce. Our biggest challenge is how to make a new resource behave like a trained resource and how quickly can we achieve that. Also, since there’s going to be a limitation on number of people available of this quality, we’re also automating our processes very rapidly. Now this automation also means learning to work with machines and equipments, and that is also a training. So on all fronts, managing the resource pool and having them trained is the most important challenge that we are up with when we are rejoicing, this large intake of orders.

What is the update on your green energy plans?
On the electrolyser front, we have got our engineers trained with Mcfee their technologies. The first electrolyser which you can call prototype, is under assembly and by end of the year it’ll be out. Once we know the configuration of this new product and then we know the cost of putting it together, we should be able to start developing the market for it.

Maybe the first of the electrolysers could go to Indian Oil Corporation‘s Panipat refinery and test out the stress test product for its features and functionalities. So my guess is in 3-4 year time frame, the product will become largely well accepted. And since it’s a global market, we also need to make sure that the cost of hydrogen, the technology around it, whether for industrial application or for consumer application becomes cheaper. It has to follow the path that solar power followed, very expensive to start with and gradually become more and more affordable.

  • Published On Nov 2, 2023 at 11:49 AM IST

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