Centre notifies SEZ reforms to boost semiconductor, electronics manufacturing

New Delhi, June 9, 2025 – In a significant policy move, the Government of India has notified sweeping reforms to the Special Economic Zones (SEZ) Act aimed at revitalizing the high-tech manufacturing ecosystem, particularly in the semiconductor and electronics sectors. The Ministry of Commerce and Industry issued the notification late Monday, outlining changes intended to simplify compliance, attract global investments, and enhance India's competitiveness in critical technologies.

These reforms come amid India’s growing ambition to emerge as a global hub for chipmaking and electronics amid supply chain realignments and geopolitical shifts.

Key Reforms Unveiled

The SEZ (Amendment) Rules, 2025, introduce several investor-friendly provisions, including:

• Deemed Domestic Status for Units: SEZ units will now be allowed to sell goods and services in the domestic market at a concessional duty structure.

• Flexible Land Use: Non-processing zones in SEZs can now house residential, educational, and recreational facilities to create integrated work-live-play environments.

• Simplified Exit Norms: SEZ units shutting operations will now face fewer exit barriers, especially concerning duty deferment and asset repatriation.

• Single-Window Clearance System: A centralized digital platform will provide all approvals, streamlining the process significantly.

• Expansion of Services Sector Inclusion: Apart from manufacturing, a broader array of services such as R&D, cloud computing, and design services have been added under eligible SEZ activities.

Focus on Semiconductor and Electronics Manufacturing

The reforms are particularly tailored to accelerate the government's ₹76,000 crore Semiconductor Mission and augment India’s role in the global electronics value chain.

“India is poised to become a trusted global semiconductor manufacturing destination. These SEZ reforms are catalytic and align with the broader ambition of tech sovereignty,” said Rajeev Chandrasekhar, Minister of State for Electronics and IT.

Global and domestic players are expected to benefit, particularly those with interests in silicon fabrication, chip packaging, and display manufacturing. Companies like Micron Technology, Tata Electronics, and Vedanta-Foxconn joint ventures stand to gain from easier market access and lower compliance overhead.

Analyst Take: A Structural Shift

Industry analysts believe these reforms mark a structural transformation in India’s industrial policy.

“These changes signal a decisive shift from export-only orientation to a hybrid model that supports both domestic and international markets,” said Ankit Mehra, Director at TechPolis Consulting. “The inclusion of services and digital economy activities in SEZ eligibility is a forward-looking step.”

Mehra added that easier land-use rules and streamlined processes would help reduce project gestation periods, an area that has historically deterred large-scale investments in manufacturing.

Market Context and Timing

The reforms come at a time when the global semiconductor industry is looking to diversify supply chains away from China and Taiwan. Recent geopolitical developments, especially in the Indo-Pacific, have elevated India’s strategic importance as a manufacturing and design hub.

India’s electronics production surged to ₹9.9 lakh crore in FY24, growing at 17% YoY, and exports crossed ₹1.9 lakh crore. Semiconductors account for nearly 20% of this import bill, highlighting the urgency for domestic chip manufacturing.

“This move complements the PLI (Production Linked Incentive) schemes already in place. If executed well, it can fill a critical gap in India’s electronics value chain,” said Rekha Sinha, Policy Head, India Semiconductor Association.

Investor Outlook: Renewed Optimism

Investor sentiment has responded positively. Following the announcement, the Nifty Electronics Index rose by 2.3% in Tuesday’s session. Shares of Tata Elxsi, SPEL Semiconductor, and Kaynes Technology saw increased buying interest.

“Global investors, particularly those from Taiwan, South Korea, and the US, have been looking for policy clarity. These reforms are a strong signal of India’s commitment,” said Ashwin Lohia, Portfolio Manager, BharatTech Fund. “We anticipate strong FDI inflows into tech-centric SEZs over the next 12–18 months.”

Challenges Ahead

While the reforms are comprehensive, execution remains critical. Land acquisition, power reliability, and skilled workforce development are persistent bottlenecks.

“There is cautious optimism. The government must now focus on creating regional semiconductor clusters with robust infrastructure,” said Shruti Khandelwal, a policy analyst with Observer Research Foundation.

The newly notified SEZ reforms represent a bold step in India’s journey toward self-reliance in semiconductors and high-tech manufacturing. With implementation being the key, the coming months will determine whether India can turn policy into production at scale.

If successful, the reforms could mark the beginning of India's transition from a tech-consuming to a tech-producing economy — a pivotal shift in the 21st-century global order.