India as melting pot for China & Silicon Valley

A couple of recent articles to frame the context for this short post:

I worked in India briefly in 2008 (a couple of months on a consulting project for a Korean consumer electronics giant – you have a 50% chance to guess correctly…). Even back then, the comparisons between India and China as the two emerging markets were numerous. My impression from that project was that India was decades behind (not scientific measure, just a figure of speech) China in infrastructure (roads, electricity, water, telecommunications) but had pockets of really strong entrepreneurship and less long-term political risk.

7 years later, though I have not been back to India, I can probably safely guess the infrastructure gap is still there, since post-financial-crisis China has been pumping vast amounts of money into big infra projects such as high-speed rail and subways across the nation. And the NYTimes article confirms that a lot of the infrastructure challenges are still there for India. However, flipping this comparison the other way, it also means that India is under-penetrated and likely to represent key future growth (“the next billion” and other headlines).

Hence all the interest from US and Chinese tech companies, and this creates a curious market to watch. The safe prediction to make is that Chinese companies will focus on the (low-cost) hardware side of things while Silicon Valley focuses on software / services. In this sense, China and SV are not competing, but rather co-existing in a growing market. And this Indian melting pot may thus create some truly interesting mash-ups. 1

  1. PS: the bolder prediction is that Chinese companies will compete fiercely with their SV counter-parts… but it’s hard to see that happening. For one thing, Chinese companies are literally decades behind US companies in terms of operating globally (Lenovo being the single exception I can think of). Secondly, Chinese companies won’t enjoy the trade-protective benefits of the Great Firewall in India, and while it’s not the only reason (nor the primary reason) why US companies “lost” in China, it was certainly a big factor. Thirdly, the closer cultural bond between India and the US (look at how many senior execs in Silicion Valley are of Indian descent, vs. Chinese) is also not in favor of Chinese companies.