L&T Technology Services (LTTS) is betting on artificial intelligence (AI) for manufacturing and operations to offset pricing pressure from AI-led efficiencies in parts of its engineering business, as it seeks to monetise the technology through proprietary tools, licences and new industrial applications, chief executive Amit Chadha said on Monday.

Speaking at the launch of the company’s Engineering Intelligence (EI) Lab for Manufacturing and Operations in Bengaluru, Mr. Chadha said AI was reducing the effort required for engineering tasks while opening up new business opportunities in products and manufacturing.

“The third part of the business is AI for manufacturing and operations, which is what this lab is about. And this, again, is a net new for us,” he said, outlining LTTS’s three areas of AI activity: engineering, products, and manufacturing and operations.

Pricing pressure is more pronounced in IT and AI-assisted product development, where automation reduces the effort required to complete tasks. LTTS is seeking to offset this through growth in AI-enabled products and manufacturing applications, he said.

The engineering research and development (ER&D) company is already pursuing manufacturing AI projects with clients in pockets of the U.S. and with two European clients. Built on Siemens and NVIDIA technologies, the new Bengaluru lab will serve as an experience centre where customers can explore applications such as digital twins, factory simulations and improvements in material movement across production lines.

LTTS plans to extend its work beyond discrete manufacturing to process industries, including pharmaceuticals. It is also exploring the use of drones and autonomous mobile robots in manufacturing facilities, warehouses, distribution and supply chains. The company plans to set up another manufacturing-focused lab in the U.S. before the end of the current financial year.

Monetising AI

Mr. Chadha said AI was reducing the effort involved in generating code, models, diagrams, mechanical drawings and Mr. components. LTTS is developing proprietary tools and working with technology partners to help clients complete such tasks faster.

“Does effort go down? Yes, effort goes down,” he said.

LTTS is already generating revenue from proprietary tools and licences, which account for 1% of its revenue, he said.

The company is also developing AI-enabled products that process inputs such as visual images, heat and sound at the edge. Pricing for physical AI work is “definitely different and better”, he said, without disclosing comparative pricing, margins or the expected revenue contribution from manufacturing AI.

Mr. Chadha said LTTS’s six strategic bets accounted for about 50% of its revenue at the end of the previous financial year. The company expects these areas to contribute about 80% of revenue over the next five years.

The six strategic bets are Software-Defined Mobility; Plant Buildout and Modernisation; Energy and Industrial Automation and Digital Manufacturing; Next-Generation Compute and AI Infrastructure; Software Platforms and Engineering Intelligence; and MedTech.

LTTS did not disclose the investment in the Bengaluru lab or quantify the productivity gains and reductions in factory downtime customers could achieve through the solutions demonstrated there.

The company spends about 2% of its revenue on research and development-related activities, including laboratories, employee training and engineering assets, Mr. Chadha said.