New Delhi, July 17 -- Tata Electronics Pvt. Ltd. is preparing to make India's first semiconductor wafers on far older technology than it originally expected, underscoring the challenges the country faces in trying to build a domestic chip industry from scratch.

The tech arm of the sprawling Tata Group is preparing to build the country's first large-scale chip fab or production plant mostly based on 90-nanometer process technology at its facility at Dholera, Gujarat, said people familiar with the matter, who asked not to be identified discussing private deliberations.

That's a very mature technology used in lower-end industrial applications and cars-one which risks becoming obsolete in coming years. It's also a far humbler start than the...