Tamil Nadu's new chip scheme: what local suppliers should know
The state has launched a scheme to bring chip packaging, materials and equipment makers to Tamil Nadu. It rewards units that buy from local suppliers, which opens a door for factories that will never make a chip.
· 3 min read · For owners of factories and suppliers in Tamil Nadu, and colleges and ITIs near industrial clusters
Tamil Nadu launched a new incentive scheme for semiconductor (chip) units last week, at the Secretariat in Chennai. Most of our readers will never build a chip plant. But the scheme pays these plants more if they buy from Tamil Nadu, so it matters to local machine shops, chemical makers, packaging firms and colleges too.
What the scheme is
The Tamil Nadu Semiconductor Ecosystem Scheme 2026 is issued by the state's Industries, Investment Promotion and Commerce Department. It covers chip packaging, chip and display fabs, semiconductor equipment, materials and test facilities.
- Track 1 adds state support on top of central support, for projects approved under Semicon 2.0, the central government's chip scheme.
- Track 2 is for projects outside the central scheme. The state decides these case by case.
- An investor picks one track per project, not both.
- Proposals must reach Guidance Tamil Nadu, the state's investment agency, on or before 30 September 2027.
Why it matters if you are a supplier
The scheme has a Localisation Support Incentive. A unit that sources at least 20% of its cost of goods sold from products made in Tamil Nadu gets an extra capital subsidy. This is 5% of eligible fixed assets in A and B category districts and 10% in C districts, paid over 10 years. The unit must keep the 20% level every year.
So these units have a clear reason to buy locally, and to prove each year how much they bought from Tamil Nadu. Expect them to ask where your products are actually made, and for papers that show it.
Track 2 also has entry levels that some established Tamil Nadu firms could meet. For semiconductor-grade chemicals, gases, substrates, lead frames and packaging materials, it is ₹50 crore of investment and 50 jobs. For making semiconductor equipment, or for test facilities, it is ₹100 crore and 50 jobs.
Jobs and training
- A training incentive of ₹10,000 per person per month, for 12 months, for Tamil Nadu residents in technical roles. It runs for 24 months for women, transgender persons, persons with disabilities and SC/ST employees.
- Track 2 units must keep at least 50% of direct jobs, and 60% of jobs paying above ₹25,000 basic a month, for Tamil Nadu domicile employees.
Colleges and ITIs near the Sriperumbudur, Oragadam and Hosur clusters can use this to start talks with new units about courses and placements.
What to do now
- If you supply parts or materials: list which products you make in Tamil Nadu and which you only buy and resell. Only value made and sourced here counts.
- Get your quality records in order: inspection reports, batch records and certificates, kept so you can find any lot in minutes. Expect detailed supplier checks.
- If you plan a unit yourself: read the scheme document, choose a track, and talk to Guidance Tamil Nadu early. You can apply before central approval comes.
- Watch for changes. The state says it may adjust rates and segments if Semicon 2.0 changes.
How we can help
When a large buyer audits you, clean records matter more than a good brochure. We build shop-floor systems that keep inspection results, batch history and machine data in one place. Vizhi can check parts by camera, and Thudippu can warn you before a machine fails. See our work for factories, and if you are getting ready to supply this industry, talk to us.
