Tamil Nadu Unveils Robust Incentives For Semiconductor Industry Growth Under New Policy

Under its newly launched Semiconductor and Advanced Electronics Policy 2024, the Tamil Nadu government will offer up to 50 per cent of additional financial incentives to semiconductor projects selected under the Centre's USD 10 billion chip subsidy plan. If a semiconductor project selected by the Centre sets up its manufacturing in Tamil Nadu, it will also be eligible for more incentives to train personnel, stamp duty, land and electricity concessions.

The state government has committed to reimbursing 50 per cent of the project-related expenses, up to a maximum of INR 1 crore during the investment period, specifically for in-house Research and Development related to patents, copyrights, trademarks, and geographical indications registration. Additionally, an interest subvention of 5 per cent will be provided as a rebate on the interest rates for term loans supporting the project.

Incentivizing Prototyping Innovation

To promote prototyping within the state, eligible units engaged in semiconductor manufacturing will be granted a 25 per cent subsidy on the capital expenditure for establishing product testing and prototyping facilities, with a cap at INR 1 crore, as outlined in the policy.

Semiconductor manufacturing has been designated as a sunrise sector under the Tamil Nadu Industrial Policy 2021. Companies anticipating approval for semiconductor manufacturing from the Centre can apply to the Tamil Nadu government's industries, investment promotion & commerce department for incentives. However, the disbursal of these incentives is contingent upon approval and subsequent financial assistance from the Centre.

Driving Electronics Growth

The policy also extends the structured incentive package to advanced electronics manufacturing, applicable to new and expansion projects with investments from January 1, 2024. Companies must meet a minimum investment threshold of INR 200 crore and create a minimum of 150 jobs for the initial INR 200 crore investment.

For each additional INR 50 crore invested, a minimum of 35 jobs should be generated. These thresholds must be met within the standard investment period of four years, and companies must commit to a minimum of 20 per cent in-house or unit-level value addition from the manufacturing facility.