There was continuous talk of creating a semiconductor ecosystem in the country. For which efforts were also made rapidly. Despite this, India’s oldest and only government chip plant is waiting for its rejuvenation. This plant was destroyed due to fire about 4 decades ago. A plan was made to restart it. But for the last 6 months it was stuck only at the planning level. The planning to start it has not been approved yet. Even six months after the government selected three private companies to modernize the Semiconductor Laboratory (SCL) in Mohali, the project is still awaiting necessary approvals and other decisions, government officials and industry insiders said.
On 4 December 2025, Tata Semiconductor Manufacturing, Cyient Semiconductors and Applied Materials emerged as the preferred bidders for SCL’s Rs 4,500 crore ($470 million) modernization project. In a Mint report, four officials with direct knowledge of the matter and people associated with the industry said that a number of factors are affecting India’s intentions to restart semiconductor manufacturing plants. An official said that one of the reasons is that this proposal will require the approval of the Union Cabinet.
Another senior official directly involved in the approval process said in a media report that the government is in the process of submitting the necessary documents for cabinet approval. The official said that the bidding companies were selected in December to complete the tender process. We are now in the process of submitting the necessary application to the Cabinet for approval, although they did not give any time frame for this. The third official said that this approval is very important to give the necessary contract to the SCL project.
The beginning of SCL and a mysterious fire
Although India is now trying its best to take the lead in this sector, SCL Mohali was established way back in 1984—that is, a full three years before the formation of world giant Taiwan Semiconductor Manufacturing Company (TSMC). The objective of this project was to make the country an important part of the emerging semiconductor supply chain in Asia, because at that time in the era of personal computing, American giants like Intel, IBM, Fairchild Semiconductor and Texas Instruments were competing to make chips. However, a mysterious fire in 1989 destroyed much of SCL’s machinery, and the fab unit never reached its full potential.
In 2023, the central government announced about Rs 10,000 crore to revive, modernize and expand SCL Mohali. Although there is no information about the total expenditure so far, but it is expected that an amount of Rs 4,500 crore will be part of this announced budget.
Where is the matter stuck?
An industry executive said in a media report that one of the main reasons for the delay in issuing contracts is the central government’s stance that it is considering how it will handle a second, separate set of contracts for expanding the existing SCL Mohali facility, apart from modernisation. Earlier, it had come to light in media reports that this matter became a big challenge when the Centre’s talks with the Punjab state government regarding the allocation and price of land could not reach any conclusion.
The industry executive cited above said that issues like building a consensus on the allocation of land parcels, how contracts will be issued for expansion, and whether the tender process could clash with private companies selected for the modernization process are yet to be negotiated, which has hindered the ability of private companies to begin work on it.
India Semiconductor Mission 2.0
This delay in modernization of the 43-year-old semiconductor fabrication unit is happening at a time when the Government of India is in the process of allocating a new budget of Rs 1.25 lakh crore for the second phase of the Semiconductor Incentive Scheme. It is expected that ‘India Semiconductor Mission 2.0’, to be notified by the end of 2026, will provide financial assistance to the industry in creating the entire value chain of semiconductors in the country.
Another industry executive with knowledge of the matter said the companies selected as preferred bidders are already in talks with SCL. However, a final order will be required to expedite the work so that they can also get clarity and make the necessary capital expenditure (capex). He further said that the Ministry of Electronics and IT (Meity) might be waiting for the Cabinet to approve the next project budget under the Mission before approving the SCL project.
What is the upgrade plan?
In February, SCL had invited bids to upgrade its existing 180 nanometer (nm) fabrication line. In fact, today’s chips are made at 2nm, while home appliances use chips made between 28nm and 100nm. The smaller the nanometer, the smaller, faster and less power consuming the chips will be.
The 180-nanometer process is an old chip making technology, which is still used today to make chips for satellites, space and defense systems, medical devices, micro-controllers, power management, etc. In chip making, nanometers measure the size of small parts such as transistors on a chip and the space between them.
Improving an existing fab involves replacing decades-old equipment. This change is very important, because SCL Mohali is expected to provide fabrication, testing and packaging facilities to the country’s chip design startups. Today, only companies using 180nm chips can take advantage of the SCL feature, limiting its strategic value. In its tender, SCL Mohali said one of its main objectives is to double its chip manufacturing capacity—from 700 WSPM (wafer starts per month) to 1,500 WSPM.
What will be the role of the three companies?
Each of the three selected bidders has applied for different areas of expertise in the modernization plan. Tata Semiconductor will assess the existing facilities and infrastructure, identify deficiencies, suggest necessary upgrades and handle installation, replacement and maintenance of the equipment. Cyient will provide the technology to make individual semiconductor chips, while Applied Materials will provide the software and automated systems to run and manage the plant.
Meanwhile, industry insiders believe that the delay is mainly due to administrative reasons, and does not mean that the project has been shelved. Ashok Chandak, president of industry body ‘India Electronics and Semiconductor Association’, said in a Mint report that SCL Mohali “remains very important strategically, and the central government intends to use this facility to indigenously produce chip designs and patents.
Chandak further said that SCL Mohali will reduce India’s dependence on foreign and private chip makers only for research, experimental tape-out and trial manufacturing of chips. The delay is merely administrative, and this project should remain a top priority for government incentives in the technology sector.
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