India has amended its Special Economic Zone (SEZ) Rules, 2006, to catalyze investment and manufacturing in the high-tech semiconductor and electronic components sectors, the government announced on June 9, 2025. The reforms aim to address the unique challenges of these capital-intensive industries, which often face longer gestation periods and higher import dependencies.

Under the revised Special Economic Zones (Amendment) Rules, 2025, the minimum contiguous land requirement for establishing an SEZ exclusively dedicated to semiconductor or electronic components manufacturing has been dramatically reduced from 50 hectares to just 10 hectares. This strategic reduction is expected to encourage more focused and specialized investments.

Further facilitating ease of establishment, the amendments empower the Board of Approval for SEZs to relax conditions related to encumbrance-free land. This means that land identified for SEZ notification can be mortgaged or leased to the Central Government, State Government, or their authorized agencies, provided reasons are officially recorded.

In a move to enhance the financial viability of units in these sectors, the Net Foreign Exchange (NFE) computation for semiconductor sector services will now include the value of goods received and the relaxation and facilitation measures notified in the SEZ Rules are a part of the continued measures to promote and encourage manufacturing in SEZs through diversification into emerging or focus sectors. 

These specific initiatives, coupled with the relaxation in relation to manufacturing services by units for overseas entities and textile SEZs in Gujarat, may further boost economic activity in the SEZs, augmenting their overall contribution to the trade and economy of India. supplied on a free-of-cost basis. The valuation for these goods will be determined according to the Customs Valuation Rules, 2007.

Analysts at PwC said “the relaxation and facilitation measures notified in the SEZ Rules are a part of the continued measures to promote and encourage manufacturing in SEZs through diversification into emerging or focus sectors,” adding “These specific initiatives, coupled with the relaxation in relation to manufacturing services by units for overseas entities and textile SEZs in Gujarat, may further boost economic activity in the SEZs, augmenting their overall contribution to the trade and economy of India.”

The SEZ units involved in semiconductor and electronic components manufacturing will now have greater flexibility in their supply chains. They are permitted to supply finished goods to the Domestic Tariff Area (DTA) upon payment of applicable duties. They can also transfer finished goods to a Free Trade and Warehousing Zone within the same SEZ or to another SEZ unit, based on instructions from the overseas entity. Notably, units providing manufacturing services to overseas entities are no longer mandatorily required to supply capital goods, raw materials, sub-assemblies, components, or semi-finished goods.

Beyond the semiconductor and electronics sectors, the amendments also include other facilitations. The minimum land requirement for textile SEZs and Articles of Textiles SEZs in Gujarat has been reduced from 20 hectares to four hectares.

These comprehensive amendments are part of India’s ongoing efforts to diversify and promote manufacturing within its SEZs, fostering economic activity and augmenting the nation’s overall trade and economic contribution.

Following the notification of these rule changes, the Board of Approval for SEZs has already given its nod to significant projects. Micron Semiconductor Technology India Pvt Ltd (MSTI) has received approval to establish an SEZ facility in Sanand, Gujarat, spanning 37.64 hectares, with an estimated investment of 130 billion rupees ($1.56 billion). Similarly, Hubballi Durable Goods Cluster Private Ltd (Aequs Group) secured approval for an SEZ in Dharwad, Karnataka, covering 11.55 hectares, to manufacture electronics components, with an estimated investment of 1 billion rupees ($12 million).

The notified list of electronic components covered by these amendments for area requirement determination includes display module sub-assemblies, camera module sub-assemblies, battery sub-assemblies, various other module sub-assemblies, Printed Circuit Boards, Lithium-ion cells for batteries, mobile and information technology hardware components, and hearables and wearables.

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