India Eases SEZ Rules for Chip, Electronics Manufacturing

10 Jun 2025 CW Team

Recognising the longer gestation periods and high capital intensity of semiconductor and electronics manufacturing, the minimum contiguous land requirement for SEZs dedicated to these sectors has been reduced from 50 hectares to just 10 hectares under the amended Rule 5 of the SEZ Rules, 2006. Additionally, Rule 7 has been revised to allow the Board of Approval (BoA) to relax the requirement for land to be encumbrance-free, in cases where land is mortgaged or leased to the Central or State Government or their authorised agencies.

Another key amendment to Rule 53 now permits the inclusion of goods received and supplied on a free-of-cost basis in Net Foreign Exchange (NFE) calculations, in line with applicable customs valuation rules. Meanwhile, Rule 18 has been modified to allow SEZ units in the semiconductor and electronics component sectors to supply goods to the Domestic Tariff Area (DTA) after paying the applicable duties.

These reforms aim to simplify procedures, enable better utilisation of land and capital, and offer greater market access, making India a more attractive destination for high-technology investments.

Following the reforms, the BoA has approved two major SEZ proposals. Micron Semiconductor Technology India Pvt Ltd (MSTI) will set up a semiconductor manufacturing SEZ in Sanand, Gujarat, over 37.64 hectares, with an estimated investment of Rs 130 billion (approx. USD 1.56 billion). Aequs Group’s Hubballi Durable Goods Cluster Pvt Ltd will establish an SEZ in Dharwad, Karnataka, spanning 11.55 hectares with an investment of Rs 1 billion (approx. USD 12 million) for electronics components manufacturing.

These developments mark a strategic push to strengthen India’s semiconductor ecosystem and reduce import dependency in the electronics sector, aligning with broader national goals for technology-led industrial growth.

The Indian government has introduced landmark reforms in the Special Economic Zones (SEZ) rules to attract pioneering investments in the semiconductor and electronics component manufacturing sectors. These changes, notified by the Department of Commerce on 3 June 2025, are expected to significantly boost domestic high-tech manufacturing, support capital-intensive industries, and create skilled employment opportunities.Recognising the longer gestation periods and high capital intensity of semiconductor and electronics manufacturing, the minimum contiguous land requirement for SEZs dedicated to these sectors has been reduced from 50 hectares to just 10 hectares under the amended Rule 5 of the SEZ Rules, 2006. Additionally, Rule 7 has been revised to allow the Board of Approval (BoA) to relax the requirement for land to be encumbrance-free, in cases where land is mortgaged or leased to the Central or State Government or their authorised agencies.Another key amendment to Rule 53 now permits the inclusion of goods received and supplied on a free-of-cost basis in Net Foreign Exchange (NFE) calculations, in line with applicable customs valuation rules. Meanwhile, Rule 18 has been modified to allow SEZ units in the semiconductor and electronics component sectors to supply goods to the Domestic Tariff Area (DTA) after paying the applicable duties.These reforms aim to simplify procedures, enable better utilisation of land and capital, and offer greater market access, making India a more attractive destination for high-technology investments.Following the reforms, the BoA has approved two major SEZ proposals. Micron Semiconductor Technology India Pvt Ltd (MSTI) will set up a semiconductor manufacturing SEZ in Sanand, Gujarat, over 37.64 hectares, with an estimated investment of Rs 130 billion (approx. USD 1.56 billion). Aequs Group’s Hubballi Durable Goods Cluster Pvt Ltd will establish an SEZ in Dharwad, Karnataka, spanning 11.55 hectares with an investment of Rs 1 billion (approx. USD 12 million) for electronics components manufacturing.These developments mark a strategic push to strengthen India’s semiconductor ecosystem and reduce import dependency in the electronics sector, aligning with broader national goals for technology-led industrial growth.

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