Karnataka seen as biggest beneficiary of renewed push to woo chipmakers

Karnataka, home of “India’s Silicon Valley” Bengaluru, could soon think beyond software.

The state is well-placed to become the biggest beneficiary of the central government’s Rs 76,000-crore scheme to boost semiconductor manufacturing in India, according to India Electronics and Semiconductor Association (IESA) Chairman Rajeev Khushu.

That is good news for the southern state which was the first to release a semiconductor policy in the country, as early as 2010.

While India has mostly failed to attract chipmakers in the past two decades due to factors including poor infrastructure, unreliable power and red tape, experts are more optimistic about the latest central scheme, which promises to cover up to 50% of the project cost for companies looking to set up display and semiconductor manufacturing plants.

Karnataka’s government has always been proactive in the hi-tech space irrespective of the party in power, and the new central scheme will act as a catalyst for the growth of the electronics manufacturing sector in the state, Khushu pointed out.

On December 4, Karnataka earmarked Rs 2,000 crore (for the next five years) and allotted 200 acres of land near Bengaluru’s international airport to back its ambitions of becoming a hardware hub.

“The state has a forward-looking policy and it will be attractive for investors to set up the semiconductor ecosystem here,” IESA CEO and president K Krishna Moorthy said.

Industry watchers agreed.

“Bengaluru has been a pioneer, although the entire country will be a big beneficiary, but given the ecosystem that Bengaluru has developed, it’s certainly in the best position to attract investment,” said Navakanta Bhat, Dean of the Centre for Nano Science and Engineering at the Indian Institute of Science. “However, it will eventually boil down to which state comes forward to provide facilities such as subsidising land, power and doling out tax incentives.”, he added.

Bhat, who earned his Ph.D. from Stanford, explained why state policies were extremely important, referring to the United States, where once the federal government came out with a scheme, the states competed with each other by announcing additional incentives.

18 Indian semiconductor startups have raised about $156 million worth of funding in 34 rounds so far, Crunchbase data showed. Out of this, 12 are headquarterd in Karnataka and have raised $52 million or about a third of the total funding. For instance, XSI Semiconductor, Tessolve and Steradian Semiconductors are all based in Bengaluru.

Through the latest scheme, the Centre will work closely with state governments to establish high-tech clusters with requisite infrastructure in terms of land, semiconductor-grade water, high-quality power, logistics and a research ecosystem. It will also approve applications to set up at least two greenfield semiconductor fabs and two display fabs in the country.

"The red carpet rolled out by the Cabinet can make India not only self-sufficient but also a global supplier of semiconductor chips", said Kulraj Ashpnani, a specialist in production-linked incentive schemes at Dhruva Advisors.

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