Tamil Nadu Launches a Semiconductor Scheme That Stacks Up to 25% State Support on Top of Semicon 2.0

Tamil Nadu has made its pitch for a share of India's chip build-out. On 15 October 2026, Chief Minister C. Joseph Vijay released the Tamil Nadu Semiconductor Ecosystem Scheme 2026 at the Secretariat in Chennai. The scheme gives state incentives to chip fabrication, semiconductor equipment and materials, advanced and legacy packaging, and testing. It arrives about six weeks after the Centre notified its own ₹1.27 lakh crore Semicon 2.0 programme.

The scheme is built to sit alongside the national programme. It also covers projects that never go through New Delhi at all.

The news: two ways into the scheme

Reports of the launch describe two tracks:

• Track 1: projects already approved by the Centre. Units cleared under Semicon 2.0 get extra state support worth 15% to 25% of eligible capital cost. A 300 mm silicon wafer fab would get 25% from the state on top of the Centre's 40%. Advanced packaging also gets 25%, legacy packaging 20%, and materials, testing and equipment units 15%.
• Track 2: projects outside the central scheme. These get a fixed-capital subsidy of 15% to 25% plus a turnover subsidy of up to 2% a year for five years.

Projects on either track can also get several smaller benefits:

• training aid of ₹10,000 per person a month
• payroll and land-cost support
• stamp duty exemption
• five years of electricity tax exemption
• a 5% interest subsidy on term loans for six years

Minimum investments range from ₹50 crore for some materials and packaging units to ₹500 crore for advanced packaging. Proposals go through Guidance Tamil Nadu, the state's investment promotion agency, and the deadline is 30 September 2027.

The scheme also has a local-hiring condition. At least half of a unit's direct workforce must be Tamil Nadu residents. So must 60% of jobs paying more than ₹25,000 a month.

One caution: not every outlet has published the full incentive breakdown, and at least one said further details were not yet known. Treat the percentages above as provisional until the state publishes the scheme document.

Why the second track matters

Most state chip policies so far have mainly added money to projects already approved under the India Semiconductor Mission. BusinessToday's headline on this one says Tamil Nadu has "unlinked" its semiconductor incentives from the Centre's approval.

That matters because much of the chip supply chain is too small or too specialised to fit central schemes. Examples include speciality chemicals and gases, wafer-handling equipment, test sockets, and smaller packaging lines. A ₹50 crore materials unit is unlikely to queue for a central approval built for multi-billion-dollar fabs. A state-level fixed-capital subsidy plus a turnover-linked incentive could decide whether such a unit picks Tamil Nadu or another state.

Track 1 is aimed at large projects. A state top-up worth a quarter of eligible capital cost, on top of the Centre's 40%, would cover a large part of the up-front cost of a 300 mm fab. That is a strong bid for India's biggest semiconductor projects. Gujarat, Assam and Uttar Pradesh already host flagship fabs and assembly plants.

The national backdrop: Semicon 2.0

The Union government notified Semicon 2.0 on 31 August 2026, with an outlay of ₹1.27 lakh crore. It goes well beyond fabs. The programme has six segments:

• chip design by Indian firms
• capital equipment
• semiconductor fabs
• assembly, testing and packaging
• materials
• research and talent

The India Semiconductor Mission is the nodal agency.

Reports on the notification said silicon fabs needing at least ₹20,000 crore of investment would get 40% fiscal support. Compound-semiconductor fabs, display fabs and equipment and materials makers would get lower rates. Design start-ups and MSMEs can get milestone-linked seed funding of up to ₹15 crore. Electronics and IT Minister Ashwini Vaishnaw has said India could account for nearly 10% of the global semiconductor market in the coming years.

Semicon 2.0 is meant to bring many more kinds of companies into India's chip industry. Tamil Nadu's scheme is shaped to catch those companies.

Tamil Nadu's semiconductor track record so far

The state's chip push did not start with this government:

• 2024: the Tamil Nadu Semiconductor and Advanced Electronics Policy was launched at the Global Investors Meet in Chennai.
• August 2025: the state sanctioned a Semiconductor Design Promotion Scheme to give subsidies and prototyping grants to fabless design firms. It also set out the Tamil Nadu Semiconductor Mission 2030, which covers design firms, testing infrastructure and workforce training.
• 31 August 2026: Vijay announced a ₹175 crore semiconductor and electronics manufacturing park at Madhuramangalam in Kancheepuram district, to be built by SIPCOT. The state expects the park to attract about ₹2,000 crore of investment and create nearly 5,000 direct and indirect jobs. It will include a research and development facility.

The new scheme follows on from those steps. The Kancheepuram park provides land, and the scheme provides the subsidies to attract investors to it.

What it means for India

Tamil Nadu already has one of India's largest electronics manufacturing bases, from phone assembly to automotive electronics. Its argument to chipmakers is that their customers are already in the state. The new scheme adds a cost advantage to that argument.

Nationally, states competing on chip incentives can help or hurt. If states bid against each other for the same few fabs, public money is wasted. But a scheme like Track 2, aimed at materials, equipment and testing, could help fill the part of the supply chain India lacks most. Those smaller suppliers make large fabs viable and cut India's reliance on imported inputs.

The scheme will be judged on what gets built. Watch for which projects file with Guidance Tamil Nadu before the September 2027 deadline, and whether any are new to India rather than moved from another state.

Sources

• https://www.businesstoday.in/india/story/tamil-nadu-unlinks-semiconductor-incentives-from-centres-approval-offers-hiring-and-local-sourcing-benefits-562109-2026-10-16
• https://www.dtnext.in/news/tamilnadu/tn-announces-semiconductor-scheme-offers-up-to-25-subsidy
• https://www.dqindia.com/government-policy/tamil-nadu-semiconductor-ecosystem-scheme-2026-offers-up-to-25-subsidy-12681780
• https://engineering.industry-report.net/2026/10/15/tamil-nadu-semiconductor-ecosystem-scheme-2026-launched-25-percent-subsidy/
• https://www.electronicsforyou.biz/industry-buzz/tamil-nadu-launches-semiconductor-ecosystem-scheme-to-attract-chip-investments/
• https://www.dtnext.in/news/tamilnadu/semiconductor-manufacturing-park-to-come-up-in-kancheepuram-says-cm-vijay
• https://newsonair.gov.in/government-notifies-semicon-2-0-scheme-with-1-27-lakh-crore-rupees-outlay/
• https://www.outlookbusiness.com/news/govt-notifies-127-lakh-crore-semicon-20-scheme-to-boost-chip-ecosystem
• https://yourstory.com/2025/08/tamil-nadu-incentives-research-hubs-semiconductor-mission