Millennium Post

Did we pick Mars over microchip?

The erstwhile Soviet Union got its R&D focus wrong in the 1960s and ‘70s. The cold war, nuclear arms race and satellite spying between Moscow and Washington DC made the giant Communist country’s centrally-administered economy focus on defence, nuclear, space technologies and heavy industry. The all-important national security issue had undermined the common man’s needs and ignored consumer and market preferences. Consumerism was a taboo under Soviet communism.

Moscow found it cheaper and easier to barter some of its high-end and heavy engineering technologies and products with friendly countries such as India to import low-technology consumer items such as soaps and detergents, shoes and leather goods, textiles, made ups, tea, coffee, spices, agri-products, organic chemicals, etc and some industrial products like copiers, dry cell and auto batteries, electrical and audio equipment, cosmetics and pharmaceuticals.

In a way, India’s resource-starved, import-led and public-sector dominated planned economy, modeled on the Soviet Gosplan line, during the Nehru-Indira Gandhi era; failed to ensure a balanced economic growth. There was nothing wrong about launching nuclear and space research programmes, in which India showed a great success though the progress of achievements has been much slower than that of China, mainly due to resource constraints. But, the country’s neglect of R&D in the fields of electronics and telecommunication is inexplicable. It’s now costing India dearly.

It has become increasingly dependent on China, South Korea, Taiwan, Japan and, of course, the USA and losing billions of dollars by way of imports of telecom gears, optic fibre cables, ducts and joints.
Despite setting up companies such as Bharat Electronics, ITI, Semi-Conductor Corporation and DCM Data Products, India lost the early advantage for want of technology focus, business vision and the will to win. ‘Big Apple’ IBM, which entered India with a 100 per cent export-oriented unit in the 1970s, had to pack up soon due to a hostile government policy, earning the country a bad name before global technology owners and traders. Late starters such as Taiwan (thanks to IBM), China, S.

Korea, Japan and Singapore surged far ahead of India. Their electronic and telecom goodies are now flooding the country. India, emerged as the world’s fastest growing smartphone market, does not manufacture even a single cellphone.

Belatedly, the Modi government is making a painstaking effort to reverse the situation although it may not be easy to accomplish as the field is fully under the occupation of powerful foreign players.

Electronics and Information’s Technology (DeitY) secretary R S Sharma seems to be less pessimistic about the situation than the public perception of the domestic capability to rise and compete against MNCs after such a delayed start. Sharma says India has capability to design and develop latest equipment. Some of the latest chips for mobile phones have been designed with the help of teams of MNCs in India. ‘The country designs nearly 2,000 chips every year.

The fabless chip design activity is growing at a healthy pace of over 15 per cent per annum. But it is also a fact that the IPs (intellectual properties) of most of these chips are with companies abroad,’ Sharma adds. In a fast changing world of consumer electronics, developing technologies to keep pace with established global players is no joke. Sadly, few Indian business biggies seem to be keen to enter the field of electronics and communications hardware and gears field.

Prime Minister Narendra Modi and Telecom Minister Ravi Shankar Prasad are banking heavily on startups and considering Chinese-style subsidies to encourage domestic manufacture of telecom gears.

What India lacks, in the government’s own admission, is the ecosystem that would encourage companies to develop new products. This involves both entrepreneurial risk as well as expertise.

Although expertise is available, the ecosystem for risk taking is not so well developed. DeitY is making a concerted effort to promote startups that will develop their own chips and for which IPs would be residing in India.

Among the measures being taken by the government are: the setting up of a Electronic Development Fund (EDF) to adequately support well-managed venture capital firms funding electronics product development; promoting a fabless chip design industry with special emphasis on development of their own chips by companies to suit their commercial and strategic needs; backing up private sector participation in R&D and innovation that will involve entrepreneurs in development of chips and products for Indian market; helping special manpower development programme to create high class skills in VLSI and chip design; and setting up VLSI incubator facility to provide tools for ready use by potential start-ups in chip design.

The software and hardware strengths are increasingly becoming complementary for the industry’s success. Most major companies are ensuring strengths in both areas as the integration of these becomes a critical element going forward. Google, Microsoft, Facebook are examples of integration of software platforms with devices. The core competency in both these sectors is innovation. These are fast paced technological sectors and success is equal to innovation.

India needs to strengthen the innovation ecosystem in both these sectors going forward. Industry has to play a more important role and recognise that mere service based model will increasingly be less profitable. The government believes that while continuing to consolidate its position in the software side, India will progressively increase its capabilities in electronics design and manufacturing. Considering that the key element for future success will be innovation and product development, NASSCOM has already launched a project to have 10,000 startups.  However, the government does not see much bigger role for its hand-holding in electronics side as because the industry is relatively smaller and weaker.   

Why did India neglect the sector or failed to see its emerging importance in the social, industrial, defence, education and science and technology scenes? One can say that the real villain is India’s endorsement of ITA in 1997 which threw open the electronics hardware sector with zero import duty.

However, the truth is India’s top business houses, including the Tatas, which boasts the country’s largest software firm TCS, avoided the hard option of risking investment in manufacturing and technology development to compete with MNCs. Traditionally, Indian business houses are used to protective environment to flourish. That explains why India’s risk-averse, quick-return oriented industry chose to play safe and make it big in software. Also, product development in technological areas has not been a high point of Indian industry. While China, Taiwan and other East Asian countries excelled on cost arbitrage, India lagged due to disabilities such as poor infrastructure, high finance cost, high transaction costs, multiple clearances regime, labour laws etc.

Thanks to the ITA, the scales achieved globally are so huge that fresh entrants find it extremely difficult to overcome trade barriers created by some companies and countries. In any electronic product, a handful of companies are dominating the global market. As a result, though some attempts to develop electronics market were made earlier -- for example, SIPS in 2007 -- they were not very successful. The pace of technological advancement in electronics and IT is largely industry led. Fortunately, the R&D in space and atomic energy has been government-led and that explains the latter’s achievement. IPA
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