Back in 1983, I fell in love with computing on the BBC Micro & the Sinclair ZX Spectrum+. Having access to a computer was a small miracle back then. What was cooler was that the computer at school, a SCL Unicorn (clone of the BBC Micro) was made by Semiconductor Complex Limited Chandigarh, Punjab. The micro was legendary & my fellow enthusiasts may recall that today’s popular ARM architecture had its genesis on one of these very puppies.
Fast forward 30 years and India’s electronics import bill is poised to over take oil, topping $400 billion by 2020.
How did we get here? How does a nation that launches missions to Mars become a relative nobody in the high-tech electronics (ESDM) space.
The Services Gold Rush
We can’t build them, but we can programme them. And programme we did. Infosys, Wipro & HCL are stuff of legend. They got the country hard earned dollars in dark times. The brightest emigrated, most ending up in silicon valley where alongside the Chinese they dominated.
And while we got the gold, at home we forgot about the hardware bits – Research, Design, Development & real innovation. I guess that was relegated to government run ISRO, DRDO & other similar institutions.
Mamla Risky Hai (Matters of Risk)
The Israelis have made a fine art of creating, growing and then harvesting multi billion dollar tech companies. At the heart of their success lies a strong will, the right eco-system, risk capital, experience and serious R&D. The Chief Scientists’ Office (CSO) of Israel plays a central role in startups, providing capital, forging joint ventures, incubating & nurturing. Above all, the CSO is very protective of Israeli Intellectual Property.
India has no CSO equivalent, but has excellent talent (IIT aside) and daring entrepreneurs. Then why aren’t we seeing world beating Indian product companies in high tech? I believe a lot has to do with the lack of high risk capital for investment in basic research which is crucial to invention, creative destruction.
The truth is that tech services is a sure shot, building networking equipment for telecom or defence is not. Our financial apparatus including banks, private conglomerates, venture funds & the government really don’t like risk unless they can own and control it.
A conversation I had with one of India’s telecom Tzars many moons ago for for investing in telecom equipment startups summarised the sentiment “telecom is about regulation, not technology… our job is to manage regulation, sales & marketing; the tech we have outsourced to the Americans & Chinese…”.
It is no wonder then that despite being the second largest mobile market on the planet, we do not have a single Huawei, Cisco or Ericsson of our own. The gain of our mobile operators from sweetheart deals delivered by foreign vendors and their Exim banks ensured that any Indian innovation in core telecom products was killed off. A tragedy, considering a large part of our $400 bn import bill in 2020 originates from telecom. Those iPhones really add up quickly.
Risk capital is not available to Digital India entrepreneurs period. What you can get is high interest debt. Schemes of the government are dysfunctional, impractical targeting a few lacs to get you started, but how does one compete with Cisco & Huawei? Almost all tech VC funds are foreign and the flavour of the month seems to be E-Commerce. So how do $1-5 million revenue companies in Digital India access capital without pledging their homes?
Would India be a market leader in auto components had it not been for Maruti? Probably not. And what of India’s IT boom without the early income tax exemptions. And what of our crony capitalist, none of whom would have existed without government patronage.
So why is ESDM the bastard child? Maybe ESDM was missing its crony!
The most recent meaningful regulation in ESDM has been PMA. DeITy notified the Preference to Domestically Manufactured Electronics Goods (PMA) in 2013. The policy promotes Indian goods by reserving part of government tenders for local companies. No concession on specifications or quality, only exemptions from tender conditions like “must have 5,000 cr net profit for the last 3 years”; after all which Indian company has that! PMA was instantly opposed by COAI, probably because private telecom operators were made party to it. Their chief argument was that Indian companies cannot ever make telecom gear. It eludes me as to why potentially the biggest sponsors of telecom ESDM would oppose PMA. And while PMA was diluted to apply only to PSU purchases, it did yield immediate results with two silicon fabs being announced.
For me, the government’s message to foreign vendors was loud & clear – India no longer wants to sell services at $50/hour, we want a piece of the Intellectual Property pie, to be registered, manufactured & taxed here.
What Indian companies need are many more policies like PMA. More government stimulus, capital & industry sponsorship. Defence must participate too.
Make in India
Nothing is easy to make in India. Its hard enough to set up an office, let alone build a product. Being an Indian entrepreneur reminds me of the video game Asteroids, fragments of menacing celestial bodies coming at you in full force from all directions. Patience is crucial to persevere.
And then Modi’s Make in India happened, Digital India happened. He put sexy back into making hardware. He did in 3 words what we had struggled to do for decades. There is hope.
I believe the road is going to be long and arduous. We need to sort out our labour laws, manufacturing, incentives, logistics, taxes, ancillary industries, human resources, IPR laws and so much more. And while foreign vendors like Cisco are already taking advantage, its the smaller Indian entrepreneurs that need to be empowered to drive this revolution.
With Mr. Modi on his way to Silicon Valley to woo the diaspora, my question is, who is listening to the little guys at home.
Full disclosure – I work for Inventum, one of the only carrier-class Indian router makers. The company provides Broadband RAS, Service Routers, Billing & Provisioning systems for telecom, enterprises, education & hospitality. The views expressed here are my personal experiences as an entrepreneur in the Indian high-technology space.