L&T Ventures into Semiconductor Design with ₹830 Crore Investment, Expects ₹5 Trillion Orderbook Surge

Larsen & Toubro (L&T), a prominent engineering and infrastructure conglomerate, is set to enter the realm of semiconductor design with a substantial investment of up to ₹830 crore. The company is aiming to commence its semiconductor fabrication (fab) operations by the end of this quarter, provided all goes as planned. Additionally, L&T anticipates a substantial boost in its orderbook, with expectations of reaching ₹5 trillion by the end of this year or the first quarter of the next, surpassing its previous estimates.

L&T, in collaboration with its subsidiary, L&T Technology Services (LTTS), will assemble a dedicated team to delve into chip design. It's important to note that L&T won't be venturing into chip manufacturing but is keen on establishing chip design labs, possibly in cities like Bengaluru or Chennai in India, and design studios in the United States.

R. Shankar Raman, L&T's Whole Time Director & CFO, explained, "We understand the industrial engineering space well, and LTTS does some level of chip designing for automobile companies and others. As of now, we want to focus on the knowledge part of the chip, which is the designing and that’s where the intellectual property rights exist."

He further added, "Given our industrial background and engineering capabilities, we will operate closer to the mature nodes (a sophisticated chip), which are used more for industrial and automotive applications."

Notably, this endeavor doesn't necessitate the establishment of manufacturing facilities but rather the creation of specialized labs in India, leveraging the country's abundant talent pool. The ₹830 crore investment will be spread over a three-year period.

In the initial stages, L&T plans to collaborate with partners, such as car manufacturers or industrial equipment companies, to better understand their requirements and tailor chip designs accordingly. This collaborative approach is seen as a vital step in co-creating solutions with the customers.

In parallel, L&T is optimistic about its orderbook surging to ₹5 trillion faster than previously estimated, potentially achieving this milestone by the end of the current year or the first quarter of the next. The infrastructure sector presents a wealth of opportunities, including significant prospects in buildings, driven mainly by developments in India. This growth is expected to stem from dedicated freight corridors, capacity expansions in industries like paint, cement, steel, and automobiles.

L&T envisions substantial opportunities in various sectors, including transportation (expressways, ring road projects, freight corridors, metro projects), power transmission, water management (rural, urban, and sewage treatment), and hydrocarbon initiatives.

As of September 30, the company's order book had already witnessed a remarkable 22% year-on-year increase, reaching ₹4.51 trillion, marking a historic high for the company. These impressive figures align with the earlier projections by R. Shankar Raman, who had previously indicated the company's order book reaching ₹5 trillion within the next two years, provided the momentum continues.

Regarding the Hyderabad metro, Raman mentioned that it has shown steady improvement in terms of ridership and financial performance. Notably, the monetization of land assets and government support of ₹900 crore have been instrumental in reducing debt.

Furthermore, on the topic of private and government capital expenditure (capex), Raman expressed optimism, noting that investments are flowing steadily. The government's commitment of ₹10 trillion has seen nearly 38% of it invested as of August, and private capex is also gradually coming in, with capital constraints not being a significant hurdle.