India’s SEZ Reforms Set to Boost Semiconductor Startups & MSMEs: A Strategic Leap in High-Tech Manufacturing

In a major reform poised to transform India’s electronics manufacturing landscape, the Ministry of Commerce and the Ministry of Electronics and IT (MeitY) have introduced critical changes to the Special Economic Zone (SEZ) policy, aiming to bolster the semiconductor and electronic components sector. This progressive move is expected to unlock significant potential for MSMEs and startups operating in the high-tech manufacturing space.

The reforms are being hailed as a landmark shift toward making India a global hub for semiconductor and electronics manufacturing, particularly as the country seeks to reduce its import dependence and build a resilient supply chain.

Key Policy Reforms: A Snapshot

- Reduction in Minimum Land Area Requirement: The minimum contiguous land area requirement for SEZs has been slashed from 50 hectares to just 10 hectares, a move that significantly reduces the entry barrier for small and mid-sized enterprises.

- Use of Encumbered Land Allowed: Companies can now use encumbered land for setting up SEZ units, a flexibility that addresses long-standing land acquisition challenges, especially in urban and semi-urban areas.

Industry Applauds the Move

Mr. Ashok Chandak, President, IESA and SEMI India, welcomed the notification with optimism:

“IESA and SEMI commend the Ministry of Commerce notification and the support of the Ministry of Electronics & IT for introducing timely reforms to the SEZ framework tailored for the semiconductor and electronics components sector. The relaxation of contiguous land area requirements—from 50 hectares to just 10 hectares—and allowing use of encumbered land are landmark steps. These reforms make it significantly easier for companies to establish facilities and scale production in India’s high-tech manufacturing ecosystem. This will help MSMEs and startups to flourish further and boost chip, electronic manufacturing, and investor interest.

By liberalizing the policy and aligning it with the realities of land availability and global competitiveness, the government has reinforced India’s ambition to become a global electronics manufacturing destination. These measures will particularly benefit the manufacturing of strategic components such as discrete semiconductors, ICs, PCBs, display and camera modules, battery packs, passive components, and Li-ion cells—core building blocks for devices ranging from smartphones and EVs to data centres.

This is a timely and strategic push that strengthens the ‘Design in India to Make in India’ mission, and it will help create new investment pipelines, generate employment, and reduce dependence on imports. SEMI and IESA stand ready to support these efforts by working with the industry and the government to enable faster execution and deeper value addition across the electronics value chain.”

Why It Matters for MSMEs and Startups

India's electronics and semiconductor ambitions cannot be realized without empowering its micro, small, and medium enterprises. MSMEs and startups form the backbone of the electronics value chain, from component manufacturing to final assembly and R&D.

The revised SEZ norms enable:
- Faster Setup of Fabless Units and Component Plants
- Lower Capital Entry Barrier for Startups
- Increased Participation in Strategic Sectors
- Better Access to Infrastructure and Export Incentives

By allowing smaller and strategically located units to benefit from SEZ incentives—like tax holidays, duty-free imports, and simplified compliance—the policy enhances ease of doing business for newer and smaller players in the sector.

Focus Areas That Will See Direct Impact

These reforms are expected to spur MSME-led growth and innovation in the following key areas:
- Semiconductors & Discrete Components
- Integrated Circuits (ICs)
- Printed Circuit Boards (PCBs)
- Display & Camera Modules
- Battery Packs and Li-ion Cells
- Passive Components (Resistors, Capacitors, Inductors)

Aligning with National Goals

This policy overhaul resonates with India’s broader missions:
- Atmanirbhar Bharat (Self-Reliant India)
- Make in India
- Design in India to Make in India
- PLI Scheme for Semiconductors and Electronics

Together, these initiatives provide a robust policy matrix to attract global investors while nurturing domestic talent and entrepreneurship.

The Road Ahead

India’s SEZ reform marks a pivotal shift in enabling inclusive high-tech industrial growth. It simplifies infrastructure access, invites new-age entrepreneurs, and enhances global investor confidence.

As India prepares to roll out multiple chip fabrication plants, display units, and component ecosystems, the MSME and startup ecosystem will play a foundational role in value creation.

With strategic guidance from industry bodies like IESA and SEMI, and robust policy support from the government, India is well on its way to becoming the next global destination for semiconductor and electronics manufacturing.