Bengaluru, Feb. 2: The Karnataka Semiconductor Policy arrived on Tuesday, a good 18 months late. However, the state became the first in the country to announce — a development that an industry watcher feels could mark the beginning of a "China-like race". In China, all provinces compete with each other to attract investments.

Preliminary reading of the policy, unveiled by chief minister BS Yeddyurappa at the India Semiconductor Association’s ‘Vision Summit’ in Bengaluru, invoked varied reactions from the industry — "a victory of thought", "fantastic", "positive", "humble".

The policy gets the sector more visibility and could prove instrumental if Karnataka’s dream of touching an electronics market of $120 billion by 2020 is to fructify.

Victory

The policy is a step in the right direction and a "victory" because it is start-up friendly. It reduces the many barriers to entry that a new player must face. There is monetary help coming for R&D work and the filing of patents, for instance.

The state government will set up a ‘Karnataka Fund for Semiconductor Excellence’ of Rs 10 crore. The fund will cover up to 50 per cent of a company’s R&D expense — but has a ceiling of Rs 10 lakh per firm. The policy says that preference will be given to projects submitted by fresh engineering graduates.

Financial assistance, though not quantified, will be extended to firms wanting to protect their IP, in accordance with the incentives provided in the Industrial Policy 2009-14.

The government is also committing an additional amount of Rs 25 crore to the Karnataka Information Technology Venture Capital Fund. The fund, with a current corpus of Rs.26.25 crore, aims to make long-term funds available to unlisted technology companies, helping them "develop competitive products and cutting-edge technology."

Fantastic

The semiconductor industry feels the policy is "fantastic" because of its holistic nature —although there is a distinctive start-up bias, some of the fiscal incentives can be leveraged by everybody. The policy brings solar and renewable energy under its ambit; solar farms will come up in Bijapur, Gulbarga, Raichur, and Bellary districts.

The policy then seeks to nurture human resources. The government will set up a school under IIITB at a cost of Rs 10 crore and strengthen the research labs.

Humble

The policy, however, is "humble" because the amount of financial assistance is not what the industry expected. It wanted much more considering the capital intensive nature of the industry.

The Rs 10 lakh ceiling on R&D expense help appears way too tiny — developing IP for mobile phones or any complex processor from scratch, for instance, can take up to three years and 200 man effort per year. That can cost upwards of $2 million.

"It will address a small part of the cost issue. The numbers could have been better," board member of ISA’s Executive Council Anil Gupta says. "I am sure the government will realise that the number needs to be increased," he adds.

Some in the industry say the assistance should not be looked at in isolation. There are a bunch of incentives in the policy and all put together, is indeed encouraging. It’s a good beginning but the challenge will really be to convert the policy into better implementation.

Goutam Das