India's SEZ Reforms Ignite Semiconductor Manufacturing Boom

The Indian government has introduced sweeping reforms in the Special Economic Zones (SEZ) rules to cater to the specific needs of the semiconductor and electronics manufacturing sectors. Acknowledging the high capital and import dependency of these sectors, the amendments aim to encourage substantial investments and enhance manufacturing capabilities in this high-tech arena.

In a significant change, Rule 5 of the SEZ Rules, 2006, now mandates only 10 hectares of contiguous land for SEZs dedicated to semiconductor and electronic component manufacturing, a reduction from the former requirement of 50 hectares. Additionally, Rule 7 now allows for certain flexibility concerning land encumbrances, providing that such land is mortgaged or leased to government bodies or their authorized agencies.

The updated Rule 53 facilitates easier Net Foreign Exchange (NFE) calculations by including the value of goods received or supplied for free. Amendments to Rule 18 permit SEZ units within these sectors to supply domestically, following duty payments. These moves, notified by the Department of Commerce on June 3, 2025, are projected to propel India's semiconductor ecosystem and generate skilled employment.

The Board of Approval for SEZs has already endorsed projects from Micron Semiconductor Technology India Pvt Ltd and Hubballi Durable Goods Cluster Private Ltd (Aequs Group). Micron's facility in Sanand, Gujarat, will be developed on 37.64 hectares with Rs. 13,000 crores investment, while Aequs plans its Dharwad, Karnataka, SEZ on 11.55 hectares, investing Rs. 100 crores.

India's semiconductor industry is emerging, with companies keen to exploit its significant potential amid global chip shortages. In May 2025, a new semiconductor unit in Jewar, Uttar Pradesh, was greenlighted by the Union Cabinet. It's a collaborative effort by HCL and Foxconn, with operations set to commence by 2027. This endeavor is part of a broader strategy, including five new units, to cultivate a self-reliant semiconductor industry, bolstering national security and innovation.

(With inputs from agencies.)