At Semicon India 2025, the India Semiconductor Mission’s (ISM) annual flagship conference, Prime Minister Narendra Modi unveiled the first “made-in-India” chip, the Vikram 32 microprocessor. The chip was jointly developed by the Semiconductor Laboratory (SCL) at Mohali, in collaboration with the Indian Space Research Organization (ISRO) for use in the operation of space launch vehicles. Amid uncertainty about whether this was India’s first “manufactured” chip or the first packaged chip made in India, the news came at a time when the SCL was looking to upgrade its production facilities. Accordingly, this article looks at the progress of the SCL fab modernization plan based on publicly available documents, and potential learnings for future upgrades to government-owned fabs and for India’s larger semiconductor ecosystem, especially regarding the use of refurbished equipment.
Background
The plan to upgrade the SCL was first announced in 2022. The SCL is currently the only integrated device manufacturer (IDM) semiconductor facility in India, meaning it operates everything from assembly, testing, and packaging (ATP) and design labs to foundries. It has long served India’s space program and its chips have even powered ISRO’s Mars Mission. With the stated intent to “support the replacement and upgrades of existing equipment and the addition of new equipment,” a tender for its upgrade was formally floated in February 2025. The purpose of the upgrade was to augment the capacity of the fab from the current 500–600 wafer starts per month (WSPM) to 1,500 WSPM and add Gallium Nitride on silicon technology to its suite of capabilities. This upgrade will be to the 200 mm wafer line at the SCL.
The SCL modernization plan is allocated ₹10,000 crore (approximately $1.2 billion) out of the total ₹76,000 crore (approximately $9.2 billion) earmarked for the ISM. This substantial investment underscores the significance attached to the SCL foundry’s modernization by the Indian government, as it serves mission-critical projects in both the ISRO and the Defence Research and Development Organization.
The key players for the SCL modernization bid were shortlisted in June 2025 after a technical evaluation. What remains now is the conclusion of the financial bid assessment, following which, the Indian government will decide on the letter of award for the SCL modernization. However, in its response to certain bidders’ queries, the SCL made clear that all plants and systems being procured must be new and if refurbished, it must have at least 80 percent residual life left. The next few sections of this article examine the rationale behind this stipulation and suggest areas for flexibility regarding sourcing equipment and systems for fabs, as evidenced by India’s other policies in the larger semiconductor and electronics sector.
New Equipment Versus Refurbished Equipment
One key learning over the last four years for most companies has been the need and capacity to seamlessly ramp up facilities in India as the ecosystem grows. This is harder for greenfield facilities, since it involves setting up a fab from scratch with a ramp-up process here requiring a standard operating procedure that is different from that of brownfield fabs. For instance, the semiconductor industry is built on an intricate supply chain where even the smallest deviations in terms of expected timelines for project completion can create a cascading effect for other players in the value chain. This is where refurbished equipment could come in—their ready availability and proven utility mean shorter lead times, even if they may be viewed as a bit dated compared to new equipment.
Indeed, the ISM’s incentive schemes note that refurbished equipment is not excluded from the scope of the capital expenditure fiscal support they provide, though they lay down a minimum threshold for its use expectancy. Other jurisdictions also echo similar priorities. For instance, in the United States, the National Institute of Standards and Technology’s summary of responses to the U.S. Department of Commerce Request for Information for the semiconductor sector revealed that “existing fabs” need to be availed more as they “have an experienced team, existing customers, processes, infrastructure etc. and as such, should be more likely to sustain economic viability.”
Current Regulatory Framework
That being said, a plain reading of the ISM fab incentive scheme, the SCL modernization request for proposal (RFP), and other omnibus policies dealing with foreign trade reveal some ambiguity around the use of refurbished equipment in semiconductor facilities. Currently, refurbished equipment fall within the definition of “capital goods” under the Foreign Trade Policy (FTP) 2023. Consequently, their import is not subject to regulatory guidelines, unless explicitly prohibited, restricted, or reserved for exclusive trading through state enterprises. Chapter 2 of FTP 2023 establishes the import policy for capital goods including second-hand capital goods. Refurbished equipment, which would reasonably fall under the category of second-hand goods, should therefore be governed by Chapter 2 as well.
At the same time, based on stakeholder feedback, there is a concern among some in the industry that the import of refurbished equipment is restricted, owing to a May 2024 circular issued by the Directorate General of Foreign Trade (DGFT) under the Ministry of Commerce, which seeks to restrict the import of second-hand goods.[1] However, a closer reading reveals that the DGFT circular is applicable only to consumer goods, not to capital goods or second-hand capital goods such as semiconductor manufacturing equipment. Therefore, for all purposes, nothing in India’s legislative scheme governing semiconductor equipment restricts the import of refurbished equipment, so long as certain stipulations are adhered to—that the refurbished equipment must have a residual life equivalent to approximately 80 percent of that of an original and new piece of similar equipment.
This is where the provisions of the SCL modernization RFP documents depart from the above-stated position. Specifically on refurbished equipment, the SCL modernization call for proposal mentions the following:
- All plants, systems, and components supplied and installed for the augmentation and modification of existing utilities infrastructure will be new and not refurbished.
- Original equipment manufacturers (OEM)-refurbished tools must have OEM support of at least ten years from the time of tool acceptance and a minimum residual life of 80 percent at the time of shipment, as per applicable government norms.
- The bidder would have to supply and install all necessary accessories, sub-modules, and support tools like chiller units, chemical delivery system, liquid delivery system, vacuum pumps, and so on, along with the equipment. This equipment must be new, unless these parts are integral to the equipment and the equipment itself is being supplied as refurbished.
From a holistic reading of the above conditions, it appears that the general rule is that refurbished equipment is not to be procured for the modernization of the SCL, and only in two cases can any exceptions be made: (i) for OEM-refurbished tools (not entire plants, systems, or components) where a residual life of 80 percent is maintained; and (ii) in cases where certain accessories and support tools themselves are inseparable and rather, integral to the refurbished equipment sought to be supplied to the SCL.
Time for Rethink on Refurbished Equipment?
Concerns surrounding refurbished equipment are understandable, as the SCL reportedly spends ₹127 crores (approximately $14 million) annually on repair and maintenance of its equipment. Government officials, as per media reports, attribute this expense to the refurbishing of old equipment. However, it is unclear why a distinction is drawn between refurbished equipment procured by the SCL and those sourced under the ISM’s schemes, and other guidelines such as the FTP 2023 or even the now-expired SPECS scheme. Refurbished equipment ought not to be viewed as one-dimensional fab paraphernalia or a one-time investment, bereft of long-term and multi-pronged use. It can be made to serve multiple purposes in the Indian semiconductor value chain.
Refurbished equipment ought not to be viewed as one-dimensional fab paraphernalia or a one-time investment, bereft of long-term and multi-pronged use.
For instance, some local semiconductor industry submissions have alluded to the constraints that market players have to face in India regarding infrastructure and talent availability. The skills required for the sector are versatile, ranging from expertise in fab construction to setting up cleanroom facilities, among others. Industry players then argue that the SCL could not only serve the captive needs of ISRO and other government projects, but also function as a semiconductor fab training facility, incorporating facilities such as cleanrooms, electronic design automation (EDA) software licenses, and semiconductor manufacturing equipment like etching and lithography tools. This can be achieved through procuring inexpensive and relatively cheap refurbished equipment.
This multi-dimensional utilization of the SCL may also be worthwhile, considering the $1.2 billion upgrade cost. It is important to consider whether the upgraded version of the SCL will be compatible with a future upgrade. The SCL RFP seeks to modernize up to 8-inch, 1,500 WSPM, from the current 500–600 WSPM, raising questions about what a future upgrade to the modernized SCL might look like. Also, would the current modernization plan require a substantial modification of the current SCL fab equipment and layout? The costs involved in such a process are likely high, as modules are custom-built for the SCL, and unavailable off-the-shelf. Accordingly, given the cost-sensitive nature of the upgrade, it would be best to get the most out of the SCL upgrade and explore how the use of refurbished equipment can be made more permissive.
There may also be some ancillary issues that could stem from the import of such refurbished equipment. For instance, it is possible that given the nascent semiconductor ecosystem in India, a lot of the refurbished equipment is imported for the first time and may not have a precedent in terms of applicable Harmonized System Codes (HS Code) by the Indian customs authorities. The lack of an accurate HS Code to track such imports could lead to over-invoicing of the relevant pieces of equipment upon shipment, and result in higher customs duties payable by the company importing it. Indian regulatory authorities must predict and prepare for such possibilities while considering a regime that facilitates the import of refurbished equipment toward India’s growing semiconductor needs.
Conclusion
For India’s semiconductor ecosystem to be viable in the long run, the government must constantly nourish it by topping up relevant incentive schemes, bringing a whole-of-government approach to unclog bottlenecks, and iterating on policy whenever warranted. Incubating a semiconductor industry does not have a one-size-fits-all approach, and India must be on the lookout for solutions that work for it. After all, India’s semiconductor mission was never about leapfrogging other competing nations, but about establishing a foothold in the supply chain. With a slew of investments totaling $18 billion over the last four years, India has achieved this to a large extent. But for the momentum to continue, it should explore all possible solutions to optimize its budding capabilities in the semiconductor supply chain. The usage of refurbished equipment as a cost-effective solution to building fabs and talent training facilities might be a good start in this regard. Most Indian policies already look favorably at such equipment, but discrepancies remain between the fine print and modernization plans for government-owned fabs. India has long been a pioneer of cost-effective solutions, and giving serious consideration to refurbished fabs could mark the convergence of a tech-savvy, cost-effective, and uniquely Indian approach.
[1] Based on an unpublished dossier on U.S.–India AI infrastructure which included stakeholder feedback on semiconductor sector challenges, accessed by one of the authors at an industry event in Bengaluru on June 25, 2025.