The government has eased rules to boost manufacturing of semiconductors and electronic components by allowing companies to set up factories on smaller plots in special economic zones (SEZs) which will lower the cost of entry. These units will also be allowed to sell their products in the domestic market, in addition to exports.

According to a gazette notification issued by the Ministry of Commerce and Industry, the minimum land requirement for factories in SEZs exclusively meant for making semiconductors or electronic components has been reduced to 10 hectares from 50 hectares required earlier.

Similarly, in multi-product SEZs, the minimum land requirement has been lowered to four hectares from 20 hectares earlier. This rule will be applicable in Goa, Uttarakhand, Himachal Pradesh, Nagaland, Manipur, Mizoram, Arunachal Pradesh, Tripura, Meghalaya, Sikkim, Ladakh, Puducherry, Andaman and Nicobar, Lakshadweep, Daman and Diu, and Dadra and Nagar Haveli.

The relaxed norms will apply to sectors including semiconductors, display module sub-assemblies, various other module sub-assemblies, printed circuit boards, lithium-ion battery cells, mobile and IT hardware components, hearables, and wearables. These changes, under the Special Economic Zones (Amendment) Rules, 2025, came into effect on June 3.

The move forms part of the government’s strategy to boost the production of semiconductors and electronic products in the country amid global trade uncertainties that can potentially disrupt supply chains. India’s demand for chips has surged in recent years with the robust rise in the manufacturing of smartphones and electric vehicles in the country.

The Special Economic Zones (Amendment) Rules, 2025, notified by the government on June 3, also give greater autonomy to manufacturers to move or sell finished goods.

Under the relaxed rules, companies can now either export the goods directly from India or sell them in the country (domestic tariff area) by paying the required taxes. They can also move their goods to a free trade and warehousing zone in the same or a different SEZ or to a customs bonded warehouse, which is a special storage under government control. This gives more flexibility to the companies to manage their inventories and increase profitability.

Besides, service providers based in SEZs can now source raw materials, capital goods, components and consumables from the domestic market, other than imports. This will make things easier as SEZ units are required to bring in more foreign exchange through exports than they spend on imports.