Does a US semiconductor company need an Indian subsidiary?

Not always. A company may use suppliers, a distributor, a contract engineering partner or a subsidiary depending on its commercial plan. A subsidiary is worth assessing when the business needs its own team, contracts, facility, assets or long-term control.

Does incorporation qualify the company for semiconductor incentives?

No. Incorporation and scheme eligibility are separate. Eligibility depends on the current programme, project category, application requirements and approval.

Can the Indian subsidiary own semiconductor IP?

Potentially, but ownership and licensing should be decided deliberately in the contracts, employee documents and intercompany arrangements. Tax, transfer-pricing and export-control considerations may also matter.

What should be checked before importing equipment?

Confirm classification, customs treatment, import permissions, site requirements and any scheme-specific conditions before shipment. Requirements depend on the equipment and intended use.

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US to India · Semiconductors and electronics

Setting Up an Indian Subsidiary for a US Semiconductor Company

A US semiconductor business considering India may be planning a design team, validation lab, packaging or testing operation, electronics manufacturing, or a wider supplier ecosystem. These are not interchangeable projects: each needs a different view of people, facilities, equipment, IP, customers and capital.

Prepared by AU Corporate's CA-led advisory team · Published 13 October 2026 · General guidance; confirm current rules and project-specific requirements before acting.

Quick answer

How should a US semiconductor company plan an Indian subsidiary?

Start by defining whether the India operation will focus on chip design, engineering, testing, packaging, manufacturing, sales or sourcing. Those activities have different site, capital, incentive, import, IP and regulatory needs. Then confirm the FDI route, project eligibility and operating model before incorporating or committing to a facility.

1. Define the semiconductor activity first

Separate design and software work from wafer fabrication, assembly, testing, packaging, component manufacturing and distribution. A design office may mainly need engineers, secure systems and clear IP agreements. A manufacturing or packaging facility can require a much larger site, utilities, equipment import plan, quality controls and project approvals.

Write down the activity the Indian entity will actually perform.
Identify whether the project is a service operation, lab, factory, packaging/test facility or sales entity.
Map customer and supplier contracts, expected headcount, equipment and capital expenditure.

2. Choose an entity and verify the FDI route

A private limited subsidiary is often worth assessing for a long-term team, local contracts, employment or owned assets. But incorporation does not itself approve a semiconductor project, guarantee access to an incentive scheme or authorise a regulated activity. Confirm the current FDI policy and any sector-specific conditions against the exact business model and ownership.

Review the latest DPIIT FDI policy and any applicable sector conditions.
Check beneficial ownership and any approval requirement before accepting investment.
Decide whether the parent will fund the company through equity, eligible debt or a combination reviewed by advisers.

3. Assess incentives and project eligibility separately

India has announced support programmes for parts of the semiconductor and electronics ecosystem. Eligibility, application windows, project categories, required investment, milestones and approval are scheme-specific. Do not build a business case on an assumed subsidy or treat company incorporation as scheme approval. Review the current [MeitY semiconductor programme information](https://www.meity.gov.in/semi-con-india) and scheme documents with the project team.

Match the project to the relevant scheme category before preparing an application.
Model the project both with and without potential fiscal support.
Track application conditions, evidence, milestones and reporting obligations separately from corporate compliance.

4. Protect IP, technical data and group services

Chip design, verification and engineering teams may handle valuable source code, design files, process knowledge and customer confidential information. The US parent and Indian subsidiary should document who owns pre-existing IP, who owns new work, what rights are licensed, how engineers access data, and how intercompany services are priced. Build security, confidentiality and export-control review into the operating plan where relevant.

Use written intercompany service and IP agreements.
Align employee and contractor agreements with the intended IP ownership model.
Review cross-border access to technical data, customer restrictions and export-control obligations with qualified counsel.

5. Plan equipment, imports, site and operations

A project involving equipment or physical production needs a site and infrastructure plan before the company signs binding commitments. Check customs classification, duties, import permissions, product standards, power and water requirements, environmental and local permissions, fire and factory requirements, and any state-level approvals that apply to the actual facility.

Identify the importer of record and documentation for equipment.
Confirm state and local permits before construction, installation or production.
Define quality, traceability, supplier and customer-audit processes.

6. Budget for recurring India compliance

The subsidiary will need accounting, statutory audit, tax and company-law compliance. Cross-border funding and related-party transactions may also trigger FEMA reporting and transfer-pricing obligations. If it employs staff, plan payroll, withholding, labour-law and state-level registrations. Build a compliance calendar with named owners rather than leaving it until after the first financial year.

Plan bank onboarding and capital remittance before the first funding date.
Document share issue and applicable RBI/FEMA reporting.
Set up monthly books, payroll, tax review and parent-company reporting from the start.

Official sources to check

Use official material as the starting point and confirm that it remains current for the proposed activity. The correct route can depend on ownership, contracts, location, the exact services or products, and changes to rules or scheme conditions.

Related guides

For the broader incorporation route, start with our India entry guide for US companies. AU Corporate can help map the India-side entity, tax and compliance workstreams to the proposed operating model.

This article is general information, not legal, tax, regulatory or investment advice. Scheme availability and requirements can change; no approval or incentive is guaranteed.