Tamil Nadu cuts chip subsidies loose from Centre's approval

C Shivakumar @ CHENNAI:
Tamil Nadu has delinked its semiconductor incentives from central government approval, offering chipmakers a fixed set of state subsidies they can negotiate against even if their projects are not selected under Union government's Rs 1,27,500 crore Semicon 2.0 programme under the Tamil Nadu Semiconductor Ecosystem Scheme.

The scheme notified on October 6 and launched on Thursday (October 15) by Chief Minister Joseph Vijay marks a shift from a policy framework where in state support was linked to Central assistance, according to the GO accessed by TNIE. This provides the state greater freedom tp attract semi-conductor investments by allowing state incentives or projects that haven't secured Centre's approval.

According to the GO accessed by TNIE, the scheme has dual tracks. The first one tops up central aid for projects Centre approves. The other one backs those that did not apply to Semicon 2.0 or were not picked. Investors must choose one track per project. Proposals must reach Guidance Tamil Nadu, the state’s investment promotion agency, by September 30 2027, according to official sources.

The order marks a break with the state’s 2024 semiconductor policy, which tied eligibility to central approval and capped the capital subsidy at 50 per cent of whatever Centre paid. That policy also predates Semicon 2.0 and does not cover equipment, materials, chemicals, gases or test facilities. The new state scheme covers manufacturing-related segments of the semiconductor value chain, including fabrication plants, semiconductor equipment and materials, and assembly, testing, marking and packaging (ATMP) and outsourced semiconductor assembly and test (OSAT) facilities.

Fresh incentives for chip design, research and development, and talent development may be notified separately. These areas are critical to building a deeper semiconductor ecosystem in India, strengthening domestic capabilities and reducing reliance on overseas technology and expertise, sources said.

It is learnt that till the new notification, the Tamil Nadu Semiconductor and Advanced Electronics Policy 2024 and the Tamil Nadu Semiconductor Mission 2030 will continue to provide the existing framework for these activities.

This comes in the wake of Industries Minister S Keerthana announcing the scheme during the 2026-27 Budget demand debate on August 25, 2026. She had then said Tamil Nadu could not fully benefit from the Centre’s SEMICON 1.0, and that a special incentive package would be introduced.

The scheme also puts forth a condition that equipment, materials and test-facility projects should provide 60pc of high value jobs paying as high as Rs 25,000 a month to residents of Tamil Nadu.

Factfile:
1. Tamil Nadu has delinked its chip subsidies from Union government's approval offering fresh set of state subsidies to projects that did not get Centre's approval under Semicon 2.0.
2. The new state scheme covers manufacturing-related segments of the semiconductor value chain reducing dependence on foreign technology and expertise.
3. Separate incentives to be announced for chip design, research and development, and talent development.
4. Tamil Nadu’s electronics exports rose nearly eightfold, from $1.66 billion in Financial Year (FY) 2021 to $19.9 billion in FY2026.
5. The scheme also puts forth a condition that equipment, materials and test-facility projects should provide 60pc of high value jobs