L&T Semicon expects its chip production to start in 2 years; to set up unit later

Fabless chip company L&T Semiconductor Technologies expects manufacturing of semiconductor products designed by it to start in the next two years, a top company official said.

While speaking to PTI, L&T Semiconductor Technologies CEO Sandeep Kumar said the company will set up its chip manufacturing plants after achieving a threshold revenue in the range of $50 million to $1 billion for different semiconductor technologies.

The company is building teams to handle around 15 different products in parallel, and it is already halfway on that journey, he added.

"We will have the full force ready in the next six months. By the end of this year, we will be able to handle 15 parallel product designs. Since we have half the team, roughly six product designs have already started. Those designs will launch sometime by the end of next year, and production will start in two years from today," Kumar said.

He said the company is of the view that starting as a fabless chip firm is crucial for India to reduce dependency on foreign firms.

"First, we need to build products. We need to figure out how to sell those products that are of true strategic value. Tomorrow, you build a factory, and it is building somebody else's products from the outside. You can always shift to another fab, and that foundry can go belly up. There's always that risk," Kumar said.

He also talked about a hypothetical situation where if a developed country decides to stop sharing technology with India then in that case, the entire technology sector in the domestic market may come to a halt.

Kumar said if an indigenous company makes a product, then it is assured that the product is strategically retained in India.

"It cannot be controlled or stopped by some other country. It doesn't mean that what others are doing is wrong. In the chip industry, there is a foundry business where you build a factory, and you find other customers who want to use that factory. They will have their own challenges. I'm sure they'll figure it out," Kumar said.

Tata Electronics, Micron, CG Power and Kaynes Technologies are setting up semiconductor units in India with a cumulative investment of Rs 1.52 lakh crore.

Tata Electronics is the only company setting up two units, including the country's first big wafer fabrication plant.

Besides, Tower Semiconductor is teaming with Adani Group to set up another chip manufacturing unit with a proposed investment of Rs 83,000 crore.

HCL and Foxconn have also submitted a proposal for setting up a semiconductor plant.

Kumar said that to build on semiconductor products, L&T is in talks with several leading firms in the space and has recently signed a pact with IBM as well.

L&T Semiconductor's deal with IBM comprises engagement in a research and development collaboration to design advanced processors.

The scope of this work could include processor design for edge devices and hybrid cloud systems, as well as for areas like mobility, industrial, energy, and servers.

Kumar said the company will work on chips in the range of nanometer (nm) to 130 nanometer nodes and even smaller nodes of 2 to 5 nm that can be used in mobile phones, electric vehicles, industrial electronics etc.

It will initially get the chips produced at a semiconductor foundry outside and explore its production at an Indian unit if the cost is reasonable, he added.

Kumar said the company will look at setting up its own semiconductor units based on different technologies after achieving a minimum threshold revenue in the respective segments.

"A 28-nanometer fab and above is roughly $10 billion. In order to turn that into a profitable business, you need to have sales of roughly a billion dollars per year from that fab. We need to achieve that kind of sales outlook with high confidence before we decide to embark on setting up a silicon fab at 28 nanometers," he said.

Kumar said a 2-5 nm fab will need a $100 billion investment.

"You need to have a sales figure of $10 billion in order to make it profitable. We are not in the business of carrying loss. At least from a planning standpoint, we need to be at that (revenue) point," he noted.

Kumar said there are two other processes known as silicon carbide and gallium nitride for semiconductors. Silicon carbide is being used for power energy, and EVs and gallium nitride chips are being used for wireless products and power.

"The cost of setting up those fabs is somewhere between half a billion and a billion dollars. That means those can need about $50 million to $100 million in sales a year in order to justify that. We are looking at all options, but we think those two will occur earlier, 28 nanometers will occur later, and the five nanometers will occur even later," Kumar said.