Larsen & Toubro Ltd ( L&T) plans to invest more than US$300 million to create a chip company, joining other Indian conglomerates in a push to build out a semiconductor industry in the world’s most populous country.

The tech-to-construction company will spend the money over three years to establish a fabless chipmaker, which designs and sells semiconductors but contracts out their production. It plans to design 15 products by the end of this year and start sales in 2027, Sandeep Kumar, head of L&T Semiconductor Technologies (LTSCT), said in an interview.

Global, as well as local companies are trying to capitalise on India’s effort to build local semiconductor capacity and cut down expensive imports, seeking to tap government subsidies. Tensions between Beijing and Washington are prompting electronics manufacturers, including chipmakers, to diversify beyond China and Taiwan, with India emerging as a beneficiary.

L&T’s investment is modest compared with outlays by leading fabless chipmakers such as Nvidia Corp and Advanced Micro Devices Inc. The Indian company targets products such as power chips, radio-frequency semiconductors, and mixed-signal integrated circuits, rather than areas such as AI (artificial intelligence)-enabling graphics processing units.

“Automotive, industrial and energy - those are the sectors we’ve picked, as they are going through very heavy transformation,” Kumar said. “There is space to compete, succeed and even capture the market.”

Semiconductors have grown into a crucial resource across the world, especially as the US-China trade war threatens to make chip imports even more expensive. Several countries including the US, Germany, Japan and Singapore are boosting domestic chipmaking, trying to ensure supply of the components needed for technologies from AI to electric cars.

LTSCT now employs about 250 people, a bulk of them chip designers. It will double that by the end of 2024, Sandeep said.

The company has urged the government to help with chip designing subsidies or incentives for large companies, but it won’t seek funding from outside of the L&T group, he said.

Prime Minister Narendra Modi’s administration has created a US$10 billion programme to woo chipmakers and their suppliers. That plan has led Tata Group to build the country’s first major chip factory and driven US memory maker Micron Technology Inc to set up a US$2.75 billion assembly facility in Modi’s home state of Gujarat. The Adani Group plans to build a chip plant with an Israeli partner.

India is open to expanding that US$10 billion semiconductor fund, the head of a state agency that approves funding for chip projects said in a public briefing this week.

  - Bloomberg