India is making bold strides towards becoming a global semiconductor and electronics manufacturing leader. The aggregate valuation of the semiconductor market here stood at USD 53.2 billion in 2024 and is poised to expand at a compounded annual growth rate of 12.45% to reach USD 161 billion by 2033[1]. Recognising the sector’s ambition and potential, the Ministry of Commerce and Industry introduced significant amendments to the Special Economic Zones (SEZ) Rules in June 2025, a pivotal milestone in this journey.
To strengthen the role of Special Economic Zones in the semiconductor manufacturing ecosystem, the Ministry of Commerce and Industry, notified the Special Economic Zones (Amendment) Rules, 2025, on June 3, 2025[2] (SEZ Amendment Rules 2025). These amendments to the Special Economic Zones Act, 2006 (SEZ Act), and the Special Economic Zones Rules, 2006[3] (SEZ Rules), aim to position SEZs as a foundation for the industry’s growth. Key changes include reduced land requirements for notifying an area as SEZ, relaxed land usage norms, and greater flexibility in handling finished goods.
Key Highlights of the Amendment
- Reduced Land Requirement for SEZs: The minimum land requirement for semiconductor and electronics manufacturing has been reduced to 10 hectares from 50 hectares. This is expected to enable the establishment of SEZs in urban and semi-urban areas, where land acquisition is challenging.
- Definition of “Electronic Components”: The amendment introduces a comprehensive definition that includes display modules, camera modules, printed circuit boards, lithium-ion cells, and wearable tech components. This clarity will streamline approvals and attract a broader range of manufacturers.
- Inclusion of Free-of-Cost Goods in NFE Calculation: Units providing services in the semiconductor sector can now include the value of free-of-cost goods in their Net Foreign Exchange earnings. This aligns with international customs valuation standards and enhances transparency.
- Export and Supply Chain Flexibility: Manufacturers can now export finished goods directly or supply them to the Domestic Tariff Area (DTA) and Free Trade and Warehousing Zones (FTWZs), without the earlier requirement of supplying capital goods or raw materials. This change improves supply chain efficiency and aligns with global logistical practices.
- Relaxation in Land Certification Norms: Developers are no longer required to furnish encumbrance-free land certificates in certain cases, such as when land is mortgaged or leased to government entities. This provision is expected to accelerate project approvals and reduce delays.
The SEZ Rules signify a shift from India’s traditional “Assemble in India” model to a more robust “Make in India” approach. By lowering entry barriers and improving regulatory clarity, the amendments are expected to encourage domestic manufacturing and innovation, attract foreign investment and global supply chain partners, improve export competitiveness and operational agility and support the development of high-tech manufacturing hubs across the country.
Although the reforms are a step in the right direction, several challenges need to be addressed to realise their full potential and ensure rapid and sustainable growth of India’s semiconductor industry. Firstly, infrastructure gaps such as unreliable power, water, and logistics remain critical bottlenecks in many regions. Secondly, shortage of experienced talent pool in chip design, fabrication, and testing, which is essential for the industry’s demands. Thirdly, effective policy coordination between central and state governments is necessary, including the establishment of a single-window clearance system for streamlining project approvals. Lastly, environmental sustainability must be prioritised due to the resource-intensive nature of semiconductor manufacturing, necessitating eco-friendly practices and climate-resilient infrastructure.
The SEZ Amendment Rules, 2025, are a timely and strategic intervention in India’s semiconductor journey. They reflect the government’s commitment to building a globally competitive manufacturing ecosystem and reducing dependence on imports. However, the success of these reforms will depend on a holistic approach — one that combines regulatory agility with infrastructure development, talent cultivation, and environmental stewardship. India’s semiconductor ambitions are no longer aspirational — they are actionable. With the right support and sustained momentum, the country is well on its way to becoming a key player in the global chip economy.
[1] https://www.imarcgroup.com/india-semiconductor-market
[2] Special Economic Zones (Amendment) Rules, 2025 available here.