Tamil Nadu Launches Semiconductor Scheme with Up to 25% Capital Subsidies

The Tamil Nadu government has introduced the Tamil Nadu Semiconductor Ecosystem Scheme 2026, offering capital subsidies of up to 25% to attract semiconductor manufacturing and supply chain investments.

Chief Minister C. Joseph Vijay launched the scheme on 15 October 2026 at the State Secretariat in Chennai. The programme is designed to support semiconductor projects across fabrication, assembly, testing, packaging, materials and manufacturing equipment.

A significant feature of the new policy is that companies will not necessarily need approval under the Union government's semiconductor programme to qualify for state assistance.

The scheme provides two routes for investors. Projects approved under India's Semicon 2.0 programme can receive additional state incentives, while eligible projects outside the central programme can apply for separate financial support.

Tamil Nadu Offers Two Routes for Semiconductor Investors

Under the first category, companies approved for central government assistance can receive an additional 15% to 25% subsidy on eligible capital expenditure, depending on the type of semiconductor operation.

Projects involving 300 mm silicon wafer fabrication and advanced semiconductor packaging qualify for state support of up to 25%, subject to the scheme's conditions.

Conventional semiconductor packaging operations can receive subsidies of 20%.

The state will also provide 15% assistance for eligible investments in semiconductor-grade materials, testing and characterisation facilities, semiconductor equipment research, and equipment manufacturing, assembly or refurbishment.

The second category covers companies that have not applied under the central Semicon 2.0 programme or whose applications have not been selected.

These projects may receive capital subsidies ranging from 15% to 25% of eligible fixed assets, along with turnover-linked incentives of up to 2% annually for five years in specified categories.

This provision allows Tamil Nadu to negotiate investment support directly with semiconductor manufacturers and suppliers rather than relying entirely on central government project selection.

Investment Thresholds and Employment Conditions

The scheme sets minimum investment requirements according to the manufacturing activity.

Eligible investment thresholds begin at ₹50 crore for certain semiconductor materials and packaging-related products, while advanced packaging projects require a minimum investment of ₹500 crore.

Additional assistance includes payroll subsidies, workforce training support, land concessions, stamp duty exemptions and electricity tax relief.

Companies may also qualify for interest subsidies on eligible term loans.

The state has linked the incentives to local employment. Participating companies must ensure that at least 50% of their direct workforce consists of Tamil Nadu residents.

For higher-paying positions, defined as jobs with basic monthly wages exceeding ₹25,000, at least 60% must be filled by state residents.

Investment proposals must be submitted to Guidance Tamil Nadu, the state's investment promotion agency, by 30 September 2027.

Policy Covers Equipment, Materials and Packaging

Tamil Nadu's incentive programme extends beyond conventional semiconductor fabrication plants.

It includes manufacturing equipment, semiconductor-grade materials, testing facilities and advanced packaging operations, all of which are necessary to support domestic chip production.

The state is seeking investment from companies that manufacture substrates, chemicals, components and production equipment, alongside businesses providing testing and packaging services.

These activities require different levels of capital investment and manufacturing infrastructure, making a single incentive structure less suitable for every project.

By offering separate categories of assistance, the government intends to accommodate both large semiconductor facilities and smaller specialised suppliers.

Chip design, research and talent development are also identified within the wider policy, although separate incentives for some of these activities may be announced later.

Semiconductor Park Planned in Kancheepuram

The new scheme follows Tamil Nadu's earlier announcement of a Semiconductor and Electronics Park at Maduramangalam in Kancheepuram district.

The planned industrial park is intended to provide space for semiconductor and electronics manufacturing investments.

Tamil Nadu already has an established electronics manufacturing industry, including production operations serving consumer electronics, automotive and industrial markets.

The government is seeking to use that manufacturing base to attract companies involved in semiconductor materials, equipment, fabrication and packaging.

Access to established industrial facilities, suppliers, engineering services and skilled employees could influence investment decisions, particularly for companies entering India's semiconductor market.

However, the proposed industrial park and manufacturing projects will still require investment commitments, infrastructure development and commercial execution before they contribute production capacity.

Scheme Complements India's Semicon 2.0 Programme

Tamil Nadu's announcement follows the Union Cabinet's approval of Semicon India Programme 2.0 on 15 July 2026, with an allocation of ₹1.275 lakh crore.

The national programme is intended to support domestic semiconductor manufacturing, materials, equipment, research and workforce development.

Tamil Nadu's approach adds another layer of financial assistance while giving the state greater flexibility to support projects that may fall outside central funding decisions.

For semiconductor companies considering Indian manufacturing locations, the new policy introduces another factor into project cost calculations.

State-level subsidies, industrial infrastructure, workforce availability and access to customers will all influence the attractiveness of individual locations.

The scheme could be particularly relevant for equipment makers, materials suppliers and packaging companies seeking to establish Indian operations without committing to the scale of investment required for a complete wafer fabrication plant.

The immediate test will be whether Tamil Nadu can convert the available incentives into approved projects and construction commitments.

For investors, the main considerations will be the final subsidy eligibility, disbursement conditions, infrastructure readiness and availability of qualified workers. These factors will determine how much of the proposed semiconductor manufacturing base becomes operational.