L&T Semiconductor Technologies (LTSCT), a wholly owned subsidiary of Larsen & Toubro, has outlined plans to invest over $10 billion in a silicon fabrication plant. The investment decision, expected by 2026-27, hinges on achieving a revenue run rate of at least $1 billion per year from its own designed and patented semiconductor products, which are currently manufactured by third-party foundries for domestic and global markets.

Focus on Products, Not Foundries

Speaking to Business Standard, Sandeep Kumar, CEO of LTSCT, emphasized the company's product-focused strategy: “We have decided not to follow the foundry path like TSMC and make chips for others. Instead, we are focusing on our own product portfolio. Building a fab plant will require over $10 billion, and even with subsidies, we would still need to invest $1 billion.”

Kumar explained that such a plant would need to operate at 95% capacity to recover its costs, requiring annual revenues of $1 billion from chip sales. The company expects to assess its revenue trajectory by 2026-27 and decide whether to proceed with the plant, targeting completion by 2031.

Exploring Compound Fab Opportunities

LTSCT is also evaluating the feasibility of setting up compound fabs for materials like gallium nitride (GaN). According to Kumar, these fabs would cost around $1.5 billion and require annual revenues of $150 million to justify the investment. However, he noted that the current oversupply in the market poses challenges for this plan.

Targeting Niche Markets

The one-year-old company is focused on designing and selling semiconductor products in specialized areas such as radio frequency (RF) and sensors. Backed by an initial investment of $300 million, LTSCT aims to avoid direct competition with industry giants like NVIDIA or AMD.

“We are targeting segments with less competition, where there are multiple players, and we can carve out a niche,” Kumar explained. These markets typically demand less aggressive technology nodes, lowering development costs while offering smaller unit volumes and revenues per product.

Strategic Sector Focus

LTSCT has deliberately avoided high-volume markets like mobile and personal computing, which are dominated by established players. Instead, the company is focusing on the energy and telecommunications sectors, with its first products set to launch mid-2025.

Currently, the chips designed by LTSCT are manufactured by third-party outsourced semiconductor assembly and test (OSAT) players. Kumar added that the company is exploring contracts with domestic players like Tata to expand production within India as commercial foundries come online.

With a clear product-centric strategy and plans to build a robust revenue stream, L&T Semiconductor is positioning itself as a key player in niche semiconductor markets while paving the way for potential investments in advanced manufacturing infrastructure.