ISA Vision Summit 2010: Karnataka Semicon Policy 2010 unveiled; great opportunity for India to show we mean business!


Karnataka Semicon Policy 2010 released at ISA Vision Summit 2010 by Hon’ble Chief Minister of Karnataka, B.S. Yeddyurappa and Hon’ble IT and BT Minister, Katta Subramanya Naidu, along with B.V. Naidu, chairman, ISA and other dignitaries.

Karnataka Semicon Policy 2010 released at ISA Vision Summit 2010 by Hon’ble Chief Minister of Karnataka, B.S. Yeddyurappa and Hon’ble IT and BT Minister, Katta Subramanya Naidu, along with B.V. Naidu, chairman, ISA and other dignitaries.

The much awaited Karnataka Semicon Policy was released today at the ISA Vision Summit 2010 by the Hon’ble Chief Minister of Karnataka, B.S. Yeddyurappa and Hon’ble IT and BT Minister, Katta Subramanya Naidu, along with B.V. Naidu, chairman, ISA, and chairman and CEO, Sagitaur Ventures India Pvt Ltd, and other dignitaries.

Way back, on 25 July 2008, it was first mentioned that Karnataka could have its own semicon policy, as announced during the ISA ExCite event that day. The state semicon policy has taken own time coming — a little over 18 months!

Well, better late than never! The Indian state of Karnataka now has its own semiconductor poilcy, which was unveiled today at the ISA Vision Summit by the IT Department, Government of Karnataka, along with the ISA.

Karnataka’s target: $120 billion by 2020
Prior to the policy’s release, B.V. Naidu said: “The ISA welcomes the Karnataka Semicon Policy and we are happy that most of our recommendations to the government have been considered. This policy will play a significant role for achieving $120 billion electronic system design and manufacturing industry to grow in Karnataka.”

This means: of the national target of $400 billion by 2020 set by ISA for the Indian semiconductor industry, the Karnataka state is expected to achieve 30 percent!

Karnataka semicon policy features
Am very sure a lot of you are very keen to know about the policy! Presenting the salient features of the Karnataka Semicon Policy 2010.

Hon’ble Chief Minister of Karnataka, B.S. Yeddyurappa, highlights key points of the Karnataka Semicon Policy 2010.

Hon’ble Chief Minister of Karnataka, B.S. Yeddyurappa, highlights key points of the Karnataka Semicon Policy 2010.

* To encourage setting up of semiconductor units in tier-2 cities, other than Mysore, Mangalore, Hubli, an incentive of investment-promotion-subsidy would be provided in accordance with the Karnataka Industrial Policy 2009-2014.
* Govt. of Karnataka would provide additional amount of Rs. 25 crores, toward 26 percent contribution to the KITVEN (Karnataka IT venture capital fund) IT Fund for raising funds from the market to assist startup semiconductor units engaged in design and embedded software.
* Govt. of Karnataka would provide financial assistance to firms for filing IP in accordance with the incentives provided in the industrial policy.
* Govt. of Karnataka will provide assistance of 50 percent of the total cost toward purchase of proposed equipment for augmenting the Orchid Tech Space in the STPI to a Characterization Lab. The remaining funds would come from the industry or mobilized through PPP business model. This Lab will be a one-stop solution for hi-tech facilities and will spur growth of R&D in future technology without financial burden to budding entrepreneurs.
* ATMP units will be encouraged with special incentives in the proposed ITIR near BIAL (Bangalore International Airport), Bangalore. (Special incentives for ITIR to be announced separately).
* Govt. of Karnataka would provide all encouragement and assistance to the solar PV manufacturing units under the Karnataka Renewable Energy Policy.
* To encourage setting up of ATMPs in the state, Govt. of Karnataka would provide incentives to units set up in the state by lowering the threshold investments for ATMPs/ecosystem units with investments above Rs. 400 crores and up to Rs. 1,000 crores. Incentives would be provided on a case-to-case basis approach based on specific employment potential.
* As a policy support, to encourage innovation and R&D in chip design, product development, telecom, etc., the Govt. will set up a fund known as ‘Karnataka Fund for Semiconductor Excellence’ of Rs. 10 crores. This fund will be available to the private companies covering up to 50 percent of their R&D expenses, subject to a limit of Rs. 10 lakhs per unit. This financial assistance would be subject to repayment of 10 percent of the profit (after tax) annually for a period of 10 years. Preference would be given to fresh engineering graduates by identifying talent through projects submitted in the college and start-up companies.
* A committe comprising of representatives of VTU, ISA, industry, scientists, and financial institutions would be set up to monitor the activities and functioning of the fund.
* Karnataka Power Corp. and Karnataka Renewable Energy Development Ltd would take steps to develop solar farms on joint ventures/PPP mode in Bijapur, Gulbarga, Raichur and Bellary districts.
* Govt. to set up a focused school under IIIT at a cost of Rs. 10 crores and strengthen the research labs in the institute at a cost of Rs. 5 crores with a contribution of 25 percent from the industry.
* Fiscal incentives would be provided to semiconductor units as per the Karnataka Industrial Policy 2009-2014.
— Investment promotion subsidy.
— Exemption from stamp duty to MSME, large and mega projects.
— Concessional registration charges to MSME, large and mega projects.
— Waiver off conversion fine to MSME, large and mega projects.
— Exemption from entry tax to MSME, large and mega projects.
— Incentives for export oriented enterprises for MSME, large and mega projects.
— Subsidy for setting up ETPs to MSME, large and mega projects.
— Interest free loans on VAT to large and mega projects.
— Anchor units subsidy to first two manufacturing enterprises with minimum employment of 100 members and a minimum investment of Rs. 50 crores.
— Special incentives for enterprises coming up in low HDI districts for large and mega projects.
— Interest subsidy to micro manufacturing enterprises.
— Exemption from electricity duty to micro and small manufacturing enterprises.
— Technology upgradation, quality certification and patent registration for micro and small manufacturing enterprises.
— Water harvesting/slash conservation measures to small and medium manufacturing enterprises in all zones.
— Energy conservation, small and medium manufacturing enterprises in all zones.
— Additional incentives to the enterprises following reservation policy of the state.
— Refund of cost incurred for preparation of project report for micro and small manufacturing enterprises.

Now, let’s take a look at what the Karnataka Semicon Policy 2010 achieved and areas that need clarity!

What does the policy achieve?
1. First state semicon policy of its kind in the country. Cam be a model for other states.
2. Provides an excellent ground for startups entering semicon design and embedded software — focusing on India’s existing strengths.
3. Provides opportunities for other cities and towns in Karnataka to have some semicon related activities, and also generate employment.
4. Clear measures for IP creation and accumulation.
5. Makes it easier to procure semicon equipment for Characterization Lab.
6. Has some measures to boost semicon related local R&D.
7. Provision taken to develop solar farms in other districts.
8. The policy comes into force with effect from the date of issue of the Government order in this regard and shall remain in force for a period of five years from such date or till the issue of a new or revised Semiconductor Policy.

Where the policy requires more clarity!
1. While the ‘Karnataka Fund for Semiconductor Excellence’ for R&D is welcome, the Rs. 10 lakh per unit cap is limiting. For instance, it could get difficult to purchase/upgrade EDA tools, or hire fresh talent. Maybe, this cap will get revised in the later years.
2. While Keonics has been assigned to the task of developing IT parks in the tier-2 and tier-3 cities, I haven’t seen specific plans to develop tier-2 cities in the policy document. Perhaps, those will come by shortly.
3. In the policy document, I read a line stating: “Karnataka would draw up initiatives to set up an entire ecosystem, which would provide the infrastructure and incentives for attracting investments in the areas of solar PV cell manufacturing, ATMP facilities, wafer fabrication facility.” In fact, an entire section of the document is devoted to attracting investments for wafer fabs.

Perhaps, we should refrain from discussing about wafer fabs for the time being, and focus more on fabless. Although, if we do attract and develop a local fab, that will be great news for India!

Come on India, show the world what you are capable of!

Hon’ble IT and BT Minister, Karnataka, Katta Subramanya Naidu at the ISA Vision Summit 2010.

Hon’ble IT and BT Minister, Karnataka, Katta Subramanya Naidu at the ISA Vision Summit 2010.

The Karnataka Semicon Policy 2010 is certainly a step in the right direction. Nevertheless, make no mistake! Achieving the state target of $120 billion by 2020 (or, the national target of $400 billion by 2020) is not going to be easy.

Semiconductor manufacturing, and for that matter, electronics hardware manufacturing are vastly different from IT/ITeS segments. Expecting quick returns would be hazardous, giving the cyclical nature of the global semiconductor industry. Also, the local market needs to develop and mature further in the years ahead. As local consumption escalates, the returns are likely to get a tremendous boost!

Oh! Don’t forget the Shanzai manufacturers from China. The Indian industry will now have to compete against them as well, besides the global industry. Further, it would do well if the products produced here could also be exported, thereby increasing their footprints. Having seen the winning products and companies at Technovation 2010, it provides great hope that the Indian industry is now quite prepared to take them, and the world, head on with innovative products using the latest technologies at affordable prices.

Perhaps, help can be further given to the Indian industry by boosting electronics components manufacturing in the country. Maybe, this semiconductor policy will facilitate that as it progresses.

Definitely, the Karnataka Semicon Policy 2010 has the capability of changing the very face of the Indian semiconductor industry and the electronics hardware manufacturing industry, as well as bring about a vast change in the mindsets of people!

This policy is really meant for entrepreneurs, SMEs, startups, etc., and actually promotes risk taking.

Further, at the ISA Vision Summit 2010, both Israel and UK have expressed keen interest to work with the Indian companies. Also, other Indian states have taken note of the Karnataka semicon policy. For instance, West Bengal wants to align with the country’s vision on electronics and will be examining the Karnataka semicon policy.

Well, with the policy now tabled, here is a great opportunity for India to show the semicon and electronics worlds that we really mean business!

You know what! Even if 10 percent, and I am being cautiously optimistic, of the policy target is achieved, it would surely make for excellent results. What a change that would bring about after years of hardware neglect! Alternatively, we could even witness a scenario of Silicon Valley shifting to Karnataka Valley, rather than Shanghai Valley, and I am now being overly optimistic, which means, the state (and national) targets will be achieved!

This, ladies and gentlemen, is my understanding of the Karnataka Semicon Policy 2010. Of course, the experts would know much better than I do. Now, over to the Indian industry to deliver on the targets!

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  1. Neeraj
    February 3, 2010 at 9:14 am

    Dear Pradeep, Great coverage on your blog. I couldn’t make it to the summit due to other meetings… Let’s catch-up one of these days!

  2. Pralhadrao
    February 4, 2010 at 6:03 am

    Nice coverage of snapshots of the policy. Really it is big step ahead in the semiconductor.

    Regards,
    Pralhadrao

  3. Sandeep Dhawan
    February 12, 2010 at 7:12 am

    No Use of the same.

    When Indian Govt Policy could helped the industry in 2 years what could be achieved at state level.

    Sector belongs to Taiwan, even in electronics india could not make any landmark at global level how could in semiconductor?

    Views invited ..

    Regards,
    Sandeep Dhawan

  4. February 12, 2010 at 8:26 am

    Sandeep, even if the policies don’t work, India’s strengths in embedded and design services are well known globally, and will continue to remain so for some more time. It would be better if more attention was paid to developing the industry.

    Perhaps, you are holding shares of some Indian companies who aren’t doing well. The semicon industry isn’t exactly the IT/ITeS industry, and folks need to understand that first. If you have the kind of money to invest in semicon R&D and startups, please do so. You will realize what I mean.

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