Tamil Nadu prepares the ground to grab a major share in semiconductor landscape

Building on its position as the frontrunner in India’s electronics and semiconductor landscape, Tamil Nadu has sanctioned the Semiconductor Design Promotion Scheme under its ₹500-crore Tamil Nadu Semiconductor Mission 2030 (TNSM 2030). Announced in the Tamil Nadu Budget 2025, the scheme is aimed at turbocharging the State’s fabless design ecosystem by offering targeted subsidies and prototyping grants, positioning the State as the future nerve centre of chip innovation.

According to a Government Order, financial incentives and facilitation support will be extended to Tamil Nadu-based entities engaged in semiconductor design for Integrated Circuits (ICs), chipsets, system on chips (SoCs), IP cores, and semiconductor-linked design. For instance, for firms whose products are commercially deployed, a payroll subsidy will be offered for Tamil Nadu residents. It will be 30% in the initial year, 25% in the second year, and 20% in the third year. This subsidy will be capped at ₹20,000 per employee per month.

Payroll subsidy

Companies whose products are yet to be commercially deployed, a payroll subsidy covering 50% of the payroll cost (basic wages) of the employees for three years will be given, subject to a ceiling of ₹5 crore per company. The company should demonstrate the proposed product’s technical viability to an expert committee.

The government will also negotiate with national and international semiconductor fabs to get concessional rates for fabricating the chips designed by the local companies. The government will encourage the use of Tamil Nadu-designed semiconductor products in public procurement within the framework of the Tamil Nadu Transparency in Tenders Act.

Industries Minister T.R.B. Rajaa said, “We are unfazed by major semiconductor investments being dragged to other States, despite our unmatched talent pool and mature electronics ecosystem with global players. While we continue to attract investments in manufacturing, we will focus on semiconductor design and research and development. Our Chief Minister has made it clear that nothing shall stop our ambitions in the sector.”

Infra support

The State is also betting big on establishing Centres of Excellence (CoEs) to provide infrastructure required for chip design, testing, and validation. Tamilnadu Industrial Development Corporation Limited (TIDCO) will promote these centres by attracting private sector investment on commercial terms. It will be a ‘for-profit’ company (a special purpose vehicle) established as a joint venture between a private player or an academic institution partner and TIDCO. And TIDCO will be permitted to offer up to 40% of the project cost as grant to the SPV, not exceeding ₹75 crore per project. The government will reimburse the grant.

According to a government order, TIDCO may be given a 20% equity in each of the financially assisted SPVs, irrespective of the quantum of the grant. And the TIDCO Board has been authorised to dilute the stake to 5% for accommodating future investors in the project.

The government will facilitate the training of 1,000 students from engineering colleges in the State under the India Semiconductor Workforce Development Program (ISWDP).

TNSM focuses on four major aspects – promotion of fabless companies undertaking design, testing and packaging in the State; promotion of semiconductor machinery manufacturing; promotion of research and innovation in the semiconductor sector; and creation of skilled workforce for the global and domestic semiconductor industry.