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SEZ Rules Eased to Boost Semiconductor Manufacturing

2025-06-11

The Indian government has announced key amendments to Special Economic Zone (SEZ) rules to encourage high-tech manufacturing in semiconductors and electronic components. The changes, notified by the Department of Commerce on 3 June 2025, aim to make SEZ development more flexible and investment-friendly by reducing minimum land requirements and allowing domestic sales.

Under the revised norms, the minimum contiguous land required for establishing an SEZ exclusively for semiconductor or electronic component manufacturing has been reduced from 50 hectares to just 10 hectares. This major amendment to Rule 5 of the SEZ Rules, 2006, is expected to lower entry barriers for companies in these capital-intensive sectors.

Further, Rule 18 has been amended to permit SEZ units in these categories to supply products within India after paying the applicable duties—marking a shift from the earlier export-only restriction. Additionally, Rule 7 has been modified to allow SEZ land to be mortgaged or leased to government bodies, relaxing the requirement for it to be completely encumbrance-free.

These regulatory relaxations have already led to fresh approvals. The Ministry of Commerce and Industry announced that two new SEZ proposals have been cleared, involving a combined investment of Rs 13.1 billion. Micron Semiconductor Technology India will set up an SEZ unit in Sanand, Gujarat, with a planned investment of Rs 13 billion. Aequs Group’s Hubballi Durable Goods Cluster Private Ltd will establish its facility in Dharwad, Karnataka, with an investment of Rs 100 million.

The ministry emphasised that these initiatives will enhance India’s capabilities in semiconductor manufacturing, stimulate ecosystem development, and create highly skilled jobs. “Given the capital intensity, import dependence, and long gestation periods in these sectors, the regulatory changes are aimed at promoting pioneering investments,” the ministry said.

The reforms align with India's broader push to emerge as a global electronics and semiconductor manufacturing hub and are expected to generate strong investor interest moving forward.