Karnataka semiconductor policy to trigger growth

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The semiconductor policy of 2007 had set the tone for developing a sound semiconductor ecosystem in India. But Karnataka’s recently announced semiconductor policy will make an impact at the local level. But why was there a need for a state policy? Will this policy enhance the growth of the electronics industry in Karnataka? Harsh Parikh, senior manager, Infineon India, explains, “A focused semiconductor policy for Karnataka is a welcome step, as a substantial part of the semiconductor and Very Large Scale Integration (VLSI) ecosystem in India is concentrated in this state.”

By Jesus Milton Rousseau S.

Saturday, April 17, 2010: Experts believe that such state level policies will complement the national policy and help develop local support structure, which, in turn, will help in the development of electronics ecosystem in India. “Andhra Pradesh and Tamil Nadu successfully attract certain types of businesses through their own initiatives. Their efforts compliment the national initiative,” says Rajiv Kapur, managing director, Broadcom India.

According to Jaswinder Ahuja, corporate VP & MD, Cadence Design Systems (I) Pvt Ltd, the Karnataka policy is the right step towards attracting more investments to the state and deepening existing engagements. Agreeing to Ahuja, Ashok Chandak, senior director, NXP Semiconductors India Pvt Ltd, adds, “The policy tries to extend the value chain which already exists in Karnataka.”

Best features of the policy

The Karnataka semiconductor policy provides a host of opportunities to entrepreneurs venturing into the semiconductor design and embedded software domain. The Government offers them venture capital funds along with fiscal incentives and attractive tax holidays. “These steps will drive the industry to achieve the target of $120 billion by 2020,” says Tyagi.

Kapur says, “The policy is designed to attract new ventures and investments in semiconductor assembly text mark pack (ATMP) and electronics manufacturing in Karnataka. Besides, incubation centres will be setup to help startups. The semiconductor policy offers help to startups for expanding designing activities in tier II and tier III cities, and promises to establish manufacturing facilities (solar, ATMP) in Karnataka. “The setup of KITVEN IT fund, assistance in filing intellectual property rights (IPs) and exemption on entry taxes and stamp duties will boost small firms and create additional resources in the state,” says Vivek Tyagi, country manager, sales, Freescale Semiconductor India. According to Rajendra Kumar Khare, CMD, Surewaves, research activities at IIIT Bangalore and government funding for research work will bring the industry and academia together.

The policy also proposes setting up of labs for testing chips which is currently being outsourced. It also offers to set up semiconductor unit in tier II cities other than Mysore, Mangalore and Hubli, Dr Madhusudan Atre, president, Applied Materials India, says, “The policy has made solar manufacturing an important step for catalysing the semiconductor ecosystem. Various incentives and subsidies will encourage growth in the semiconductor as well as solar industry.”

Limitations of the policy

While fund allocation of Rs 10 crore for R&D in chip designing, product development and telecom is praiseworthy, capital of Rs 10 lakh per unit for R&D is a limiting factor, says Ahuja.

Global fabless semiconductor companies are also likely to gain very little from this policy. “More financial or tax incentives would have helped VLSI design and embedded software R&D activities in the state,” says Kapur.

EK Surendran, managing director, SRV Telecom Pvt Ltd, an EMS company looking for expansion, shares his experience, “In EMS business, lack of skilled workforce around the production unit is the main challenge. The information technology investment region (ITIR) marked by the government does not have the provision for access to workforce. In India, the concept of dormitory has not yet picked up, so it is not feasible. Even power, water and local transport and material availability problems are high.”

What it means for golden triangle

The policy further strengthens the ‘golden triangle’—Bengaluru, Hyderabad, and Chennai. “The distance between these cities is so short that this policy will also benefit organisations in Hyderabad and Chennai,” says Kapur.

According to Ahuja, companies will invest in a city where they can generate good business. “Factors like availability of manpower, infrastructure, living condition, etc, could affect their investment decision. Local government support in the form of land, tax breaks and other incentives, are also important criteria. However, there are enough business opportunities for the golden triangle to thrive,” he adds.

Infrastructure in tier II & III cities

Availability of proper infrastructure is very critical for semiconductor companies. “Incentives proposed for these cities aim to encourage inclusive growth. It provides employment opportunities to the people living in these cities and this will ensure that all the development in the state is not centered around Bengaluru alone. Tier II and III cities will be forced to make the necessary investments to ramp up their infrastructure to remain competitive,” Chandak adds.

The Karnataka semiconductor policy is a step in the right direction. This needs to be sustained with further measures in the same direction to achieve greater impact.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine

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