Policy Update
Shailja Singh
Background
Tamil Nadu has emerged as a major electronics manufacturing hub in India, supported by its industrial infrastructure, skilled workforce and established electronics supply chains. Building on this foundation, the Government of Tamil Nadu introduced the Tamil Nadu Semiconductor and Advanced Electronics Policy, 2024 to strengthen the state’s position in semiconductor manufacturing, design and related technologies. The policy seeks to attract investment, promote research and development, develop skilled talent and encourage a stronger domestic semiconductor ecosystem.
A significant step in this direction was the announcement of the Tamil Nadu Semiconductor Mission 2030 in the State Budget 2025–26. The mission is planned for implementation over five years, with an estimated allocation of ₹500 crore. Its proposed initiatives include establishing a Semiconductor Fabless Lab in Chennai at an estimated cost of ₹100 crore, in collaboration with leading industry and academic institutions, and developing two semiconductor manufacturing parks of 100 acres each—one in Sulur, Coimbatore, and the other near Palladam. These proposals aim to strengthen semiconductor design capabilities, research infrastructure and industry–academia collaboration (Government of Tamil Nadu, 2025).
The state subsequently introduced further measures under the mission, including a Semiconductor Design Promotion Scheme, Centres of Excellence and workforce-development initiatives. The policy framework was expanded in October 2026 through the Tamil Nadu Semiconductor Ecosystem Scheme 2026. According to The New Indian Express, the scheme was notified on 6 October 2026 and launched on 15 October 2026.
It broadens the scope of state support beyond the earlier framework by covering eligible projects involved in semiconductor equipment, materials, chemicals, gases, testing and research facilities. It also establishes two incentive tracks: one for projects approved under the Union Government’s Semicon 2.0 programme and another for eligible projects that have not applied for, or have not been selected for, central assistance. Eligible proposals under the scheme must be submitted to Guidance Tamil Nadu by 30 September 2027 (Government of Tamil Nadu, 2026; The New Indian Express, 2026).
Together, these initiatives reflect Tamil Nadu’s effort to move beyond electronics assembly towards a more integrated semiconductor ecosystem. Their long-term effectiveness will depend on the implementation of proposed infrastructure, the ability to attract investment across different parts of the semiconductor value chain, the availability of specialised skills and the coordination of state incentives with national semiconductor programmes.
Functioning
The Tamil Nadu Semiconductor and Advanced Electronics Policy, 2024 establishes a structured incentive framework covering semiconductor manufacturing, advanced electronics manufacturing, and high-end electronics design and research. Its approach combines financial incentives with support for land, infrastructure, workforce training, testing, research and development (R&D), and intellectual property. The incentives differ by activity, and eligibility is subject to specified investment, employment and other conditions (Government of Tamil Nadu, 2024).
For semiconductor manufacturing, the 2024 policy covered projects approved by the Government of India under the applicable semiconductor schemes. The State offered a capital subsidy of up to 50% of the capital expenditure (CAPEX) assistance provided by the Union Government. This was not a subsidy of 50% of the project’s total investment; disbursement was linked to central approval and receipt of financial assistance. Eligible projects could also receive a 25% subsidy for product-testing and prototyping facilities, capped at ₹1 crore, and a training incentive of ₹10,000 per person per month for 12 months for Tamil Nadu residents engaged in technical operations. Other provisions included a five-year electricity-tax exemption for eligible new or expansion manufacturing projects, land concessions, stamp-duty support, quality-certification assistance and interest subvention. The latter provided a 5% interest rebate for six years, with annual ceilings of ₹20 lakh for Large projects, ₹1 crore for Mega projects and ₹4 crore for Ultra-Mega projects (Government of Tamil Nadu, 2024).
For advanced electronics manufacturing, the policy provides a separate State-level incentive package. Eligible new or expansion projects must meet a minimum investment threshold of ₹200 crore and create at least 150 jobs for the initial ₹200 crore invested. For every additional ₹50 crore invested, at least 35 additional jobs must be generated. These investment and employment requirements must be met within the standard four-year investment period, and projects must commit to at least 20% unit-level value addition. The package is limited to the first 20 applications received by the relevant department. Eligible units can receive a fixed capital subsidy of 20% of eligible fixed assets and a turnover-based subsidy of 1.5% of annual manufacturing-facility turnover for five years. The package also provides training support of ₹4,000 per person per month for six months, increased to ₹6,000 for eligible women and transgender employees, persons with benchmark disabilities, and employees from Scheduled Caste and Scheduled Tribe communities. A 5% interest rebate is available for six years, subject to an annual ceiling of ₹1 crore (Government of Tamil Nadu, 2024).
For high-end electronics design and research, eligible entities undertaking semiconductor design, semiconductor-equipment design, high-end electronic product development or related software activities must establish clearly demarcated facilities in Tamil Nadu and create at least 50 jobs within four years. The policy provides payroll support for eligible Tamil Nadu residents at 30% of annual payroll costs in the first year, 25% in the second and 20% in the third, subject to a cap of ₹20,000 per employee per month. These measures are intended to strengthen design and research capabilities alongside manufacturing (Government of Tamil Nadu, 2024).
A major change was introduced through the Tamil Nadu Semiconductor Ecosystem Scheme 2026, which broadens the State’s support beyond the central-approval-linked framework of the 2024 policy. The new scheme establishes two mutually exclusive incentive tracks. Track 1 applies to projects approved by the Union Government under Semicon 2.0 and provides additional State incentives alongside central assistance. Depending on the project category, the State’s investment-promotion subsidy ranges from 15% to 25% of eligible capital expenditure approved by the Union Government. The scheme provides 25% State support for specified fabrication categories and advanced packaging, 20% for legacy packaging, and 15% for eligible semiconductor equipment, raw materials, testing and characterisation, and R&D facilities for semiconductor equipment. The applicable central scheme’s thresholds and conditions continue to govern eligibility under this track (Government of Tamil Nadu, 2026).
Track 2 is designed for eligible projects that have either not applied under Semicon 2.0 or applied but were not selected. It provides a separate route for State support, allowing Tamil Nadu to consider strategic semiconductor investments without requiring approval under the central programme. Depending on the category, eligible projects can receive fixed-capital subsidies ranging from 15% to 25% of eligible fixed assets and turnover-based subsidies of up to 2% annually for five years. Minimum investment thresholds and employment requirements vary by category. Investors must choose either Track 1 or Track 2 for a project and cannot claim both tracks for the same project. The scheme also provides additional support for eligible training, local employment, localisation, product testing and prototyping, land, stamp duty and electricity tax. For specified equipment and materials projects under Track 1, the scheme requires at least 50% of the proposed direct workforce to comprise Tamil Nadu residents and at least 60% of high-value jobs to be filled by State residents. Eligible proposals must be submitted to Guidance Tamil Nadu by 30 September 2027 (Government of Tamil Nadu, 2026).
The distinction between the two frameworks is important. The 2024 policy linked semiconductor manufacturing support to central approval and assistance, whereas the 2026 scheme introduces a dedicated route for eligible projects outside the central selection process and extends the incentive framework to previously uncovered areas such as semiconductor equipment, materials, chemicals, gases, testing and characterisation. At the same time, the two-track structure retains separate eligibility conditions, subsidy calculations and restrictions on combining incentives. Consequently, the rates and conditions of the 2024 policy should not be presented as if they automatically apply to every project under the 2026 scheme; support must be assessed under the relevant policy or track (Government of Tamil Nadu, 2024, 2026).
Performance
It is too early to attribute the growth of Tamil Nadu’s semiconductor ecosystem entirely to the Tamil Nadu Semiconductor and Advanced Electronics Policy, 2024. Semiconductor investments generally have long gestation periods, and the State’s electronics industry has also benefited from earlier industrial policies, central government schemes and an established manufacturing base. Performance should therefore be assessed through broader ecosystem indicators rather than attributed solely to the 2024 policy.
One important indicator is the growth in electronics exports. According to the Tamil Nadu State Budget 2025–26, electronics exports increased from US1.66billionin2020–21toUS9.56 billion in 2023–24, when the State accounted for approximately 33% of India’s electronics exports (Government of Tamil Nadu, 2025). Subsequent figures reported from the Union Commerce and Industry Minister’s parliamentary response indicate that exports reached US$14.65 billion in 2024–25 and approximately US$19.97 billion in 2025–26. Tamil Nadu’s share of India’s electronics exports reportedly rose from 38% in 2024–25 to 41.63% in 2025–26. These figures refer to financial years ending in March, not calendar years. The latest figures are reported from parliamentary data; the original government response should be consulted for primary-source verification (Government of India, 2026a).
Selected performance indicators
| Indicator | Reported Position |
| Electronics exports (2020–21) | US$1.66 billion |
| Electronics exports (2023–24) | US$9.56 billion |
| Electronics exports (2024–25) | US$14.65 billion |
| Electronics exports (2025–26) | Approximately US$19.97 billion |
| Share of India’s electronics exports (2025–26) | 41.63% |
| ECMS applications approved in Tamil Nadu by December 2025 | 11 out of 46 applications approved nationwide |
| Electronics Manufacturing Cluster at Manallur | Project cost: ₹587.47 crore |
| Electronics Manufacturing Cluster at Pillapaikkam | Project cost: ₹424.55 crore |
| Tamil Nadu-based semiconductor design firms listed under the DLI Scheme (July 2026) | 7 firms |
Sources: Government of Tamil Nadu; Ministry of Electronics and Information Technology; parliamentary export data as reported in July 2026.
The growth of electronics-component manufacturing provides another measure of progress. By December 2025, 11 of the 46 applications approved nationwide under the Union Government’s Electronics Components Manufacturing Scheme (ECMS) were located in Tamil Nadu. The 46 approvals represented proposed investments of ₹54,567 crore and projected production of ₹3,67,343 crore across all participating states. These nationwide figures should not be interpreted as Tamil Nadu-specific investment or production totals. The approvals demonstrate the State’s participation in the expansion of component manufacturing, but approved proposals do not necessarily indicate that production has commenced or that all projected employment has been generated (Government of India, 2026b).
Semiconductor design is another developing area. In a Ministry of Electronics and Information Technology release dated 22 July 2026, seven Tamil Nadu-based firms were listed as receiving support under the Design Linked Incentive (DLI) scheme: Aheesa Digital Innovations, Mindgrove Technologies, InCore Semiconductors, MBit Wireless, Struent Semiconductors, PRSsemicon Technologies and Sicrest Semiconductors. Four firms were listed for grants and Electronic Design Automation (EDA) tool support, while the other three were listed for EDA tool support. These are distinct forms of assistance, and access to design tools should not be described as a financial grant. The figures indicate participation in a national semiconductor-design support programme, although they do not establish that all supported firms have reached commercial production (Government of India, 2026c).
Industrial infrastructure has also expanded. The Union Government approved Electronics Manufacturing Clusters at Manallur and Pillapaikkam, with reported project costs of ₹587.47 crore and ₹424.55 crore, respectively. These projects support the wider electronics manufacturing ecosystem by providing industrial infrastructure. They should not, however, be described as semiconductor fabrication plants, since electronics manufacturing clusters and semiconductor fabrication facilities serve different functions (Government of India, 2026c).
Overall, the available indicators suggest that Tamil Nadu has strengthened its position in electronics exports, component manufacturing, semiconductor design support and related industrial infrastructure. However, these developments reflect the combined effects of State policies, central schemes and private investment. A more complete assessment of the 2024 policy would require evidence on actual investment realised, projects reaching commercial production, jobs created, domestic value addition and the development of semiconductor capabilities beyond electronics assembly.
Impact
Tamil Nadu’s semiconductor strategy has the potential to strengthen domestic supply chains, attract investment and create skilled employment. However, evaluating its long-term impact requires more than tracking investment announcements and approved projects. Public incentives must also be assessed against the investment realised, jobs generated, production achieved and domestic value added.
The Comptroller and Auditor General of India’s State Finances Audit Report for 2024–25 provides a broader fiscal context for this assessment. In Chapter I, under the section on the quality of investments in government companies, corporations and other bodies, the CAG reported that Tamil Nadu’s investment in these entities stood at ₹61,734.90 crore as of 31 March 2025. The return during 2024–25 was ₹514 crore, equivalent to 0.83% of the investment. The report also noted that the return on these investments had ranged between 0.37% and 1.56% during 2015–16 to 2024–25, compared with an average interest rate of 7.76% to 10.52% on government borrowings over the same period. The CAG identified these low returns as a concern for the utilisation of public funds and the State’s ability to generate revenue (Comptroller and Auditor General of India [CAG], 2026, Chapter I, section “Quality of investments in the companies, corporations and other bodies”).
The report also highlights pressure on the State’s fiscal resources. Subsidies amounted to ₹52,603 crore in 2024–25 and represented 16% of revenue expenditure, compared with 10.08% for all States excluding Union Territories. The CAG observed that this subsidy burden could constrain resources available for developmental spending and affect long-term fiscal sustainability (CAG, 2026, Chapter I, section “Subsidies,” Table 1.19 and accompanying analysis).
These findings do not directly evaluate Tamil Nadu’s semiconductor incentives, nor do they establish that industrial subsidies have generated inadequate returns. They nevertheless underline why the State’s semiconductor and electronics incentives should be accompanied by transparent monitoring. Evaluation should track actual public expenditure on incentives against realised private investment, commercial production, jobs created, local sourcing, domestic value addition and research outcomes. Publishing these indicators periodically would help policymakers assess whether financial support is generating durable industrial capabilities and whether the benefits justify the use of public resources.
Emerging Issues
Despite Tamil Nadu’s progress in electronics manufacturing, two structural challenges remain: dependence on central government approvals for semiconductor incentives and gaps in the domestic supply of specialised materials and equipment. Under the 2024 policy, the disbursement of incentives for semiconductor manufacturing was linked to approval and financial assistance from the Union Government. This could limit State support for otherwise viable projects that did not secure central assistance. The sector also depends on a complex upstream supply chain, including semiconductor-grade wafers, photoresists, substrates, specialised chemicals and gases, as well as manufacturing equipment. Shortages or reliance on imported inputs can increase costs, delay project implementation and constrain the development of domestic manufacturing capabilities.
The Tamil Nadu Semiconductor Ecosystem Scheme, 2026 attempts to address these gaps through a two-track incentive structure. Track 1 provides additional State support to projects approved under the Union Government’s Semicon 2.0 programme, while Track 2 allows eligible projects that have not applied for central assistance or have not been selected to seek incentives from the State. This broadens the scope for supporting strategically important investments without making eligibility entirely dependent on central approval.
The scheme also extends support beyond chip fabrication to semiconductor-grade raw materials, equipment manufacturing and refurbishment, testing and characterisation facilities, and research and development for semiconductor equipment. This wider coverage recognises that a competitive semiconductor ecosystem requires reliable domestic suppliers and supporting technical capabilities, not just fabrication and packaging facilities (Government of Tamil Nadu, 2026).
However, the scheme’s ability to overcome these challenges remains to be assessed. State incentives alone cannot guarantee commercially viable projects, competitive input costs or a reliable supply of specialised materials. The key implementation challenge will be to convert policy commitments into operational facilities, stronger domestic supplier networks and measurable reductions in supply-chain vulnerabilities. Regular reporting on projects implemented, local sourcing, production capacity and the use of incentives would help establish whether the 2026 scheme is strengthening Tamil Nadu’s semiconductor ecosystem in practice.
Way Forward
Tamil Nadu should move towards an outcome-based framework for evaluating the Semiconductor and Advanced Electronics Policy, 2024, and the Semiconductor Ecosystem Scheme, 2026. Investment commitments and approved projects indicate investor interest, but they do not establish whether the State is developing a self-sustaining semiconductor ecosystem. The government should therefore publish an annual performance dashboard distinguishing announced investments from investments realised, projects under construction and facilities that have commenced commercial production.
The framework should track domestic value addition and local component sourcing as key indicators. Alongside the existing policy emphasis on value addition, the State should report the share of eligible inputs sourced from Tamil Nadu-based suppliers, the proportion of locally manufactured components used by supported firms, and changes in import dependence for selected materials and equipment. This would help establish whether incentives are strengthening local supplier networks rather than primarily expanding final-stage assembly.
Employment indicators should similarly distinguish total jobs announced from jobs actually created and sustained. Annual reporting should cover high-skilled technical and research positions, wages, training completion, employee retention and the share of Tamil Nadu residents in the workforce. These measures would help assess whether public incentives are generating the high-quality employment envisaged under the 2024 policy, rather than relying on aggregate employment projections alone.
Research and innovation outcomes also require greater attention. The State should track private and public R&D expenditure, patents filed and granted, semiconductor designs developed, successful chip tape-outs, prototypes tested and products reaching commercial deployment. Reporting these indicators separately would help distinguish research activity from commercially usable innovation. Collaboration between industry, universities and research institutions should also be assessed through funded research projects, technology transfers and industry-supported laboratories.
Finally, the government should link the continuation or expansion of incentives to transparent performance reviews. Each supported project should be assessed against its approved investment, actual production, local sourcing, employment and innovation commitments, with periodic disclosure of incentives sanctioned and disbursed. Evaluation should account for differences in project gestation periods and avoid treating delayed projects as failures without examining their implementation stage. Publishing these results annually would strengthen accountability, help identify gaps in the supply chain and provide a clearer basis for determining whether public support is delivering lasting economic and technological benefits.
References
- Government of Tamil Nadu. (2024). Tamil Nadu Semiconductor and Advanced Electronics Policy, 2024. Industries, Investment Promotion and Commerce Department. https://storage.investingintamilnadu.com/Guidance/Uploads/Others/scp_2024.pdf
- Government of Tamil Nadu. (2025). Budget highlights 2025–2026. https://tnbudget.tn.gov.in/tnweb_files/budget%20highlights/HIGHLIGHTS%20ENG%202025_26.pdf
- Government of Tamil Nadu. (2026). Tamil Nadu Semiconductor Ecosystem Scheme, 2026. Guidance Tamil Nadu. https://storage.investingintamilnadu.com/Guidance/Uploads/Documents/tn-semiconductor-ecosystem-scheme-2026.pdf
- Government of India, Ministry of Electronics and Information Technology. (2026). Electronics Component Manufacturing Scheme (ECMS): Approvals and implementation progress. Press Information Bureau. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2222519&lang=1®=45
- Government of India, Ministry of Electronics and Information Technology. (2026, July 22). Government approves two Electronics Manufacturing Clusters in Tamil Nadu at Manallur and Pillapaikkam. Press Information Bureau. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2287658&lang=1®=3
- Government of India, Ministry of Electronics and Information Technology. (2025, October 27). Government of India approves first batch of seven projects with investment of over ₹5,500 crore under Electronics Component Manufacturing Scheme. Press Information Bureau. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2182986&lang=2®=3
- Comptroller and Auditor General of India. (2026). Report of the Comptroller and Auditor General of India on State Finances for the year 2024–25: Tamil Nadu. https://www.digitalreports.cag.gov.in/tamilnadu/overview
- DT Next. (2026). Millions, billions and percentages: The full story of Tamil Nadu’s commendable export performance. https://www.dtnext.in/news/tamilnadu/millions-billions-and-percentages-the-full-story-of-tamil-nadus-commendable-export-performance
About the Contributor
Shailja Singh is a Political Science student and Research Intern at the Impact and Policy Research Institute (IMPRI), with research interests in public policy, governance, international relations and emerging policy challenges. Her work focuses on analysing contemporary government policies and their implementation, institutional frameworks and socio-economic outcomes.
Acknowledgement
The author sincerely acknowledges the IMPRI team for their guidance, valuable feedback, and continuous support throughout the preparation of this Policy Update.
Reviewers
ANAMIKA PK
ANUSHREE KHARE
Disclaimer
This article is intended for academic purposes only. The views expressed are those of the author and do not necessarily reflect the views of IMPRI or any government.
