Larsen and Toubro (L&T) have embarked on a significant strategic move by venturing into the fabless semiconductor chip design sector. The company has greenlit the establishment of a wholly-owned subsidiary solely dedicated to fabless semiconductor chip design and product ownership. This decision to invest 830 crore in this new subsidiary marks a crucial shift for L&T. R Shankar Raman, L&T’s Chief Financial Officer, highlighted the potential of fabless semiconductor design as a high-technology, less capital-intensive endeavor. This pivot positions L&T to focus on R&D for fabless semiconductor chip design, potentially establishing an R&D center in the United States.
This move is notable as it demonstrates L&T’s intention to explore semiconductor design, where patents and intrinsic value are often found. Raman emphasized that L&T’s robust brand presence and engineering capabilities position the company favorably for this leap into the semiconductor domain. L&T’s established position in the IT & Technology Services (IT&TS) segment provides them with the domain expertise required for this new endeavor. They aim to leverage the growing semiconductor industry, where Indian talent is increasingly in demand by global companies. Their target market will primarily be the United States, Europe, and Japan.
L&T is concentrating its efforts on automotive and industrial chip design, aligning well with their current engineering capabilities. They are not currently planning to invest in chip manufacturing. Instead, they are assessing their position in the competitive landscape of chip design. During the second quarter of the fiscal year 2023-24, L&T reported a remarkable 45% surge in net profit. This growth was propelled by robust order expansion in the infrastructure segment, resulting in a net profit of Rs 3,223 crore, compared to Rs 2,229 crore in the previous fiscal quarter.
In the same quarter, L&T experienced a significant uptick in revenue from operations, increasing by 19 percent to reach Rs 51,024 crore. The enhanced execution of their substantial order book and advancements in their projects and manufacturing portfolio contributed to this growth. This figure represents a significant achievement compared to the previous fiscal year’s revenue of Rs 42,763 crore during the same quarter. Additionally, L&T secured the highest-ever order inflow in the company’s history, attaining orders worth Rs 89,153 crore at the group level during the quarter ending on 30 September 2023. This substantial growth, indicating a 72 percent year-on-year increase, signifies a remarkable upsurge in the company’s order book.
