In a major push to establish itself as a semiconductor hub, the Karnataka government is encouraging corporate investments to reshape the technology sector. Earlier this week, the state approved an investment of ₹3,425.60 crore to set up the first electronics manufacturing cluster at Kochanahalli in Mysuru. The cluster aims to create 460 jobs in the district adjoining India’s Silicon Valley.
The government has earmarked 234 acres of land in Kochanahalli for the development of an Electronics Manufacturing Cluster (EMC) and semiconductor units. This is among the first investments made after the International Semiconductor Consortium (ISMC), a joint venture between Abu Dhabi-based Next Orbit Ventures and Israel’s Tower Semiconductor, promised to invest $3 billion in the state.
This week, state commerce and industries minister MB Patil announced that the state-level committee has greenlit three new investment proposals and six more investment plans, amounting to ₹10,144.31 crore. Led by Karnataka chief minister Siddaramaiah, the committee anticipates that these initiatives will generate close to 6,000 job opportunities statewide. These efforts are part of the state government’s strategy to enhance the state’s industrial and economic framework.
As the first state to draft a semiconductor policy in 2010, Karnataka made its mark in semiconductor manufacturing very early on. This was followed by the launch of the Karnataka Electronics System Design and Manufacturing (EDSM) Policy in 2017.
Karnataka, especially Bengaluru, is home to a large pool of skilled engineers and IT professionals, many of whom are graduates from top engineering colleges in India. This talent pool is crucial for semiconductor design, manufacturing, and related services.
Looking Beyond Brand Bengaluru
Bengaluru, the tech city, has had a long reign in the semiconductor industry and has established itself as India’s manufacturing hub with an existing engineering culture and the presence of government institutions, including ISRO, BEL and DRDO, among others.
The city’s well-developed ecosystem, including research and development (R&D) centres, universities, and technology parks, supported the growth of semiconductor companies and startups.
According to the Karnataka Economic Survey of 2022–23, Bengaluru is the largest hub of semiconductor design companies in India. Nearly 70% of the country’s chip designers
work in the city, and 80% of the sector’s design revenues come from the same.
Bengaluru’s strategic location and connectivity has also made it easier for companies to access global markets, suppliers, and customers, especially considering the presence of many global capacity centres (GCCs) in the city.
State IT minister Priyank Kharge even said that the government is willing to tweak incentive and labour policies to attract major players along with their supply chains.
Fast-forward to 2024. The state is looking to expand beyond Bengaluru and take the facility to neighbouring centres like Mysuru, Doddaballapur, Kolar, and others. The state government has also been actively implementing various policies and incentives to promote the flow of investments and R&D centres beyond Bengaluru to target cities like Mysuru, Mangaluru, and Tumakuru as viable alternatives.
The government has earmarked 901 acres across four industrial clusters to accommodate the growing semiconductor industry. These clusters include 224.5 acres in Hubballi (near Kotur-Belur), 245.67 acres in Kochanahalli, 218.20 acres in Vasanthanarasapura Industrial Area (Tumakuru), and 213.14 acres in Hosahalli (Bengaluru Rural).
The state is also poised to introduce a revised Electronics System Design and Manufacturing (ESDM) policy, which aims to foster innovation and investment in the sector.
In a conversation with AIM, Srini Chinamilli, CEO and co-founder of Tessolve Semiconductor, emphasised the growing potential of tier-2 cities for the company’s operations.
Talking about the work ethics and dedication of employees in tier-2 cities, Chinamilli said, “These employees from tier-2 cities tend to be very dedicated, similar to Bengaluru. But the attrition levels are much lower.”
States Scramble to Attract Investments
There’s stiff competition between Gujarat, Telangana, Maharashtra, Tamil Nadu and Karnataka to draw leading semiconductor companies to their respective regions.
Recently, Synaptics and EmbedUR collaborated to build cost-effective AI chips from Chennai due to the city’s low attrition rates. This is regardless of the fact that about 25% of Synaptics’ global workforce is already based in India, primarily in Bengaluru.
At the start of this year, Karnataka had lost an investment of ₹3,750 crore to build an outsourced semiconductor assembly and testing (OSAT) facility in Mysuru, which was slated to create 3,200 jobs. The investor, electronics manufacturing company Kaynes Technology, later moved to Telangana and subsequently to Gujarat to build the OSAT facility at a relatively lower cost. The company is now investing ₹3,307 crore in a facility that will have the capacity to produce more than 6.33 million chips per day.
Karnataka had accused the Centre of using political influence to divert semiconductor investments away from the state and move them to Gujarat, despite the southern state having an edge.
Commenting on the political atmosphere in forcing companies to move from one location to another, Patil had voiced concerns over central government policies. He urged that semiconductor companies should be allowed greater autonomy in choosing their investment locations.
His remarks underscore the need for collaboration between the Union and state governments to ensure a conducive environment for investors.
The central government has approved nine projects in 2024 for electronic components manufacturing under the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors, with a total proposed investment of ₹7,960 crore. The total employment generation potential of these applications is 15,710 persons.
Last year, Foxconn, the Taiwanese OEM manufacturing company, and Vedanta Group called off a joint semiconductor venture investment in Gujarat, only to later move the investment to Karnataka. The company is now investing around ₹1,200 crore in the southern state.
Its chairman Young Liu was quoted as saying in a statement, “The unit in Karnataka will soon become the second-largest Foxconn plant after China’s unit. It will create 40,000 direct jobs, especially for middle-level educated individuals, and our investment will not stop here. In the future, we plan to explore other sectors as well.”
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