Karnataka, better known for its capital city - Bangalore " has announced a bunch of incentives to encourage solar photo voltaics manufacturing, start-ups into chip design and embedded software, R & D in the semiconductor sector and the setting up of assembly, test, marking and packaging (ATMP) facilities in the state.

Though Karnataka has forged far ahead in chip design and embedded software development compared to the other states in the country, it has been considerably left behind by the neighboring state of Tamil Nadu in electronics production and by Andhra Pradesh with its 'Fab City' project for solar cell and solar panel manufacturing.

Still, Karnataka is the first state to announce such a policy. Several states in the country, notably Andhra Pradesh, Delhi, Karnataka, Punjab, Kerala, Orissa, Tamil Nadu and West Bengal, are in a race to attract Indian and foreign companies to set up software development centers. Whether they also follow with such a policy of their own is to be seen.

The 'Karnataka Semiconductor Policy 2010' announced today by the state chief minister B.S. Yeddyurappa during the fifth annual summit of the India Semiconductor Association (ISA), had been in the works, for quite some time now.

The main features of the policy are:

# A $5 million contribution to the state-run Kitven IT Fund, to aid it in raising funds from the market to assist start-ups in chip design and embedded software.

# Monetary assistance from the government to companies for filing Intellectual Property Rights

# Government funds to finance half the cost of equipment for a characterization lab

# Special incentives (to be announced separately) for ATMP units in the proposed IT zone near Bangalore airport. Threshold limits for investment in ATMPs elsewhere in the state to be lowered and incentives on a case-to-case basis based on employment potential.

# Encouragement and assistance for solar PV manufacturing units under the state's renewable energy policy

# A $2 million Karnataka Fund for Semiconductor Excellence to cover up to half the R & D expenses of private firms, with a preference for fresh engineering graduates by identifying talent through projects submitted in the colleges and by start-up firms.

# Promote the setting up of solar farms as joint ventures/public-private partnership programs in the northern districts of the state.

The India Semiconductor Association (ISA) welcomed the policy. "We are happy most of our recommendation to the Government has been considered and this policy will play a significant role for the electronic system design and manufacturing industry to grow in Karnataka. The announcement of the semiconductor policy is the first of its kind in India and reflects the spirit of Government to continue its growth in the country," said B.V. Naidu, chairman, ISA and CEO, Sagitaur ventures India Pvt. Ltd.

Others were not so sure. "It is an extremely good policy and can help the state go the South Korea way. How the policy will be made operational is what is to be seen. The state government needs to be open to ideas that industry will suggest when the policy comes into effect. For instance, will they be open to the idea of providing EDA tools to start-ups," said a senior industry executive.

"We see a strong synergy between the national objectives and the Karnataka Policy. We are all very optimistic that this will also attract additional investment in the region," said Pradip Dutta, corporate vice president and managing director, Synopsys India.

The country had announced a semiconductor and electronics policy, but proposals worth billions of dollars for various projects are still awaiting clearance for subsidies and other concessions.