The Semiconductor Industry in India: Legal Approvals, Manufacturing Policies and Benefits

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Dated: 17.02.2026

The Semiconductor Industry in India: Legal Approvals, Manufacturing Policies and Benefits

The semiconductor industry is the backbone of modern technology, driving innovation across sectors such as telecommunications, automotive, healthcare, and consumer electronics. As the demand for semiconductors continues to grow globally, India is making significant strides to establish itself as a key player in this strategic sector. With the government’s proactive approach, the country is witnessing a transformation in its semiconductor manufacturing ecosystem.

This blog provides a detailed overview of the semiconductor industry in India, including legal approvals required, manufacturing policies, data related to the sector, exemptions, and tax benefits.

The Importance of the Semiconductor Industry

Semiconductors are essential components of electronic devices, enabling advancements in technologies like IoT, artificial intelligence, 5G, robotics, and smart mobility. Globally, the semiconductor market was valued at $466 billion in 2020 and is expected to grow to $656 billion by 2025. India’s semiconductor market, valued at $15 billion in 2020, is projected to reach $63 billion by 2026, driven by wireless communications, consumer electronics, and automotive electronics.

Despite its thriving electronics manufacturing sector, India’s domestic value addition remains limited due to the absence of a robust semiconductor manufacturing ecosystem. To address this gap, the government has introduced several policies and incentives to attract investments and foster growth in the semiconductor industry.

Legal Approvals Required for Semiconductor Manufacturing in India

Setting up a semiconductor manufacturing facility in India requires several legal approvals and clearances. These include:

1. Environmental Clearances

Environmental Impact Assessment (EIA): Approval from the Ministry of Environment, Forest, and Climate Change (MoEFCC) is mandatory for projects that may impact the environment.
Pollution Control Board Clearance: State Pollution Control Boards issue clearances for air, water, and waste management.

2. Land and Building Approvals

Land Acquisition Clearance: Approval for land acquisition or lease agreements.
Building Plan Approval: Clearance from local municipal authorities for construction plans.

3. Industrial Licenses

Industrial Entrepreneur Memorandum (IEM): Required for large-scale manufacturing units.
Factory License: Issued by the Chief Inspector of Factories under the Factories Act, 1948.

4. Tax Registrations

Goods and Services Tax (GST) Registration: Mandatory for all businesses operating in India.
Permanent Account Number (PAN): Required for tax compliance.

5. Other Approvals

Import/Export Licenses: Required for importing raw materials and exporting finished products.

Manufacturing Policy for the Semiconductor Sector in India

The Government of India has introduced several policies to promote semiconductor manufacturing and attract investments. The key policies include:

1. National Policy on Electronics (NPE) 2019 

The NPE 2019 aims to position India as a global hub for Electronics System Design and Manufacturing (ESDM). Key strategies include:

Facilitating the establishment of semiconductor fabs and their ecosystem.
Promoting domestic manufacturing of electronic components and semiconductors.
Encouraging R&D and innovation in the electronics sector.

2. India Semiconductor Mission (ISM) 

The ISM, launched in 2021, serves as the nodal agency for implementing semiconductor-related schemes. It focuses on:

Attracting investments for semiconductor fabs and display fabs.
Developing a sustainable semiconductor manufacturing ecosystem.
Supporting R&D, skill development, and training.

3. Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme 

The EMC 2.0 scheme provides financial assistance for the development of infrastructure and common facility centers for electronics manufacturing. It aims to create world-class infrastructure to support the growth of the semiconductor industry.

4. Production Linked Incentive (PLI) Scheme

The PLI scheme offers financial incentives to manufacturers based on their incremental sales. It covers various sectors, including electronics and semiconductors, to boost domestic production and reduce reliance on imports.

Data Related to Semiconductor Manufacturing Policy in India

Fiscal Support: The government provides up to 50% fiscal support for semiconductor fabs and display fabs under the Modified Scheme for Semiconductor Fabs.
Capital Investment Thresholds: Minimum investment thresholds range from ₹50 crore to ₹20,000 crore, depending on the type of facility.
Revenue Thresholds: Applicants must meet minimum revenue criteria, such as ₹7,500 crore for Silicon Semiconductor Fabs.
R&D Allocation: Up to 2.5% of the scheme’s outlay is earmarked for R&D, skill development, and training.

Policies, Exemptions, and Tax Benefits

The government has introduced several policies and tax benefits to incentivize semiconductor manufacturing in India:

1. Tax Benefits

Corporate Tax Rate: Companies setting up new manufacturing facilities can avail a reduced corporate tax rate of 15% under the Taxation Laws (Amendment) Act, 2019.
Customs Duty Exemptions: Exemptions on the import of capital goods and raw materials required for semiconductor manufacturing.
GST Refunds: Refunds on GST paid for inputs used in manufacturing.

2. Exemptions

Land Acquisition: State governments may offer land at subsidized rates for setting up semiconductor fabs.
Electricity Tariffs: Reduced electricity tariffs for manufacturing units.
Stamp Duty Waivers: Waivers on stamp duty for land registration.

3. Financial Incentives

Production Linked Incentives (PLI): Financial support based on incremental sales of manufactured goods.
Fiscal Support: Up to 50% of project costs for semiconductor fabs and display fabs.
Demand Aggregation Support: Purchase preference in government procurement for electronic products manufactured in India.

4. R&D and Skill Development 

Financial support for R&D activities, including test chip prototyping, validation, and technology development.
Training programs to develop a skilled workforce for the semiconductor industry.

Uttar Pradesh Semiconductor Policy 2024

The Uttar Pradesh Semiconductor Policy 2024, notified on 19th January 2024, aims to establish Uttar Pradesh as a global hub for the semiconductor industry. The policy focuses on fostering innovation, creating employment opportunities, and contributing to the state and national economy. It aligns with the Government of India’s India Semiconductor Mission (ISM) and Uttar Pradesh’s vision of becoming a One Trillion-dollar economy, supporting India’s goal of achieving a 5-trillion-dollar economy.

Key Objectives: 

Develop a robust semiconductor manufacturing ecosystem to drive economic growth and innovation.
Build advanced infrastructure for design and testing, encouraging collaboration among startups, corporations, and educational institutions.
Promote a fabless ecosystem targeting chip design enterprises and startups.
Strengthen industry-academia partnerships to nurture skilled talent.
Create an environment for establishing fabrication units and enhancing semiconductor design and manufacturing processes.

Governance Structure: 

Nodal Agency: UP Electronics Corporation Limited, responsible for policy implementation and stakeholder engagement.
Policy Implementation Unit (PIU): Oversees the Nodal Agency and recommends investment proposals to the Empowered Committee (EC).
Empowered Committee (EC): Monitors policy implementation, ensures inter-departmental coordination, and approves projects.

Policy Coverage and Eligibility: 

The policy is valid for 5 years and covers the entire state of Uttar Pradesh.
Eligible projects include those approved under ISM schemes, such as Semiconductor Fabs, Display Fabs, Compound Semiconductors, and ATMP/OSAT facilities.
Projects under Design Linked Incentives or fabless activities can apply under the UP IT/ITeS Policy 2022.

Incentives:

Fiscal Incentives:

Capital Subsidy: 50% of the subsidy approved by the Government of India.
Interest Subsidy: 5% per annum on loans up to INR 200 Cr for 7 years.
Land Rebate: Up to 75% subsidy on land purchases.
Stamp Duty and Registration Fees: 100% exemption.
Electricity Duty: 100% exemption for 10 years.
Support for Skilling and Training: Financial assistance for faculty training, internships, and hiring world-class talent.
R&D and CoE Support: Subsidies for setting up R&D centers and Centers of Excellence.
Patent Registration Fees: Reimbursement of up to INR 20 Lakhs for international patents.

Non-Fiscal Incentives:

Classification of the semiconductor industry under Essential Services and Maintenance Act (ESMA).
Guaranteed water and power supply with redundancy for uninterrupted operations.
Permission for 24×7 operations and employment of women in all shifts.
Self-certification for compliance with labor laws.

Application Process: 

Applications must be submitted through the Nivesh Mitra Portal (https://niveshmitra.up.nic.in/), which provides a streamlined process for clearances, licenses, and NOCs.
Applicants must apply for a Letter of Comfort (LoC) from the Department of IT & Electronics under the policy.

UP Semiconductor PolicyDownload

Conclusion

India’s semiconductor manufacturing policies and incentives are designed to attract global investments, foster innovation, and build a self-reliant ecosystem. With substantial fiscal support, tax benefits, and infrastructure development, the country is well-positioned to become a global leader in semiconductor manufacturing.

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Source: Ministry of Electronics and Information Technology

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