Larsen & Toubro (L&T) is foraying into fabless semiconductor chip design by setting up a subsidiary, the engineering major has said. 

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 up to 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 has 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 (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,” Mr Raman said. 

He added that 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 semiconductor chips),” Mr Raman added.