Why Are Semiconductors Important?
- Semiconductors are essential components in all modern electronic devices — smartphones, laptops, TVs, cars, etc.
- They power AI, machine learning, digitisation, and automation.
- Global supply chain disruption (esp. due to COVID-19) exposed overdependence on countries like China (which produced ~35% of semiconductors in 2021).
- Strategic significance: Semiconductor self-reliance is now critical for national security, economic resilience, and technological leadership.
Relevance : GS 3(Economy)
Why Were SEZ Rules Relaxed?
- To boost domestic manufacturing of semiconductors and electronic components.
- Part of broader efforts under the Semicon India programme (₹76,000 crore outlay).
Key Relaxations in SEZ Rules (June 2024)
- Reduction in Minimum Land Area (Rule 5):
- From 50 hectares to 10 hectares for SEZs exclusively for semiconductor/electronics.
- Enables smaller-scale investments with full SEZ benefits.
- Relaxation of “Encumbrance-Free” Land Requirement (Rule 7):
- Earlier requirement: land had to be free of legal disputes or liens.
- Relaxed now due to India’s complex land records and slow legal systems.
- Will accelerate SEZ setup by allowing flexibility in land acquisition.
- Permission for Domestic Sales (Rule 18):
- SEZ units can now sell in the domestic market (after paying duties).
- Earlier: SEZs were export-only.
- Shields investors from global trade disruptions, supports domestic tech ecosystem.
Impact So Far
- Too early to assess long-term impact, but signs of positive momentum:
- Micron Semiconductor Technology India:
- ₹13,000 crore investment.
- 37.64-hectare SEZ in Sanand, Gujarat.
- Micron Semiconductor Technology India:
- Hubballi Durable Goods Cluster (Aequs Group):₹100 crore investment.11.55-hectare SEZ in Dharwad, Karnataka.
- Total new SEZ-linked investment: ₹13,100 crore.
Strategic Significance for India
- Enhances domestic capacity in a sector central to the digital economy.
- Reduces import dependence, especially from geopolitically sensitive nations.
- Supports Make in India, Aatmanirbhar Bharat, and India’s ambition to be a global electronics hub.
Conclusion
- The relaxation of SEZ rules is a targeted regulatory reform to promote investment in semiconductors.
- It aligns with India’s strategic and economic priorities, especially in a post-COVID, tech-driven world.
- Initial investments signal positive industry response, but sustained momentum will depend on policy consistency, infrastructure support, and ease of doing business.