Hi, everyone, Peter Zion here coming to you from the foot of the St. Mary’s Glacier in Colorado. Today we’re gonna talk about Indian semiconductors in tech in general. In the last week, maybe two weeks by the time you see this, Foxconn that the big semiconductor company pulled out a joint venture with Vedanta in the state of Gujarat, which is Modi’s home state, Modi, being the prime minister of India.
Modi has put up $10 billion, the India government has I guess put up $10 million, in order to attract investors into the tech space and the pullout of Foxconn is kind of par for the course — And for good reason. There wasn’t a corruption issue here, there wasn’t even an infrastructure issue — it’s a talent issue. India is probably the country in the world that suffers the greatest volume of brain drain, no one ever doubts that Indians are actually good at IT and technological work in general. The question is, whether it’s the Indians that are in India that are good at it.
Opportunities to move abroad into states that have higher incomes, more stability, less religious persecution, blah, blah, blah, blah, blah, all that stuff, has really pulled the talent out of India, not just for the last several months or years, but decades. And Indians who are in that sector tend to move to Southeast Asia where they can be in upper management as opposed to staying in India, where they’re working for less money in order to have a more middling position. And when you’re doing tech infrastructure, and tech industrial plant, that talent is everything. And Vedanta — the partner — is a typical Indian conglomerate and is broadly useless in training up these people because of the same problem.
As soon as there’s an opportunity, as soon as you get them the skill set, they move. That’s something I can relate to personally, I am from Iowa, which arguably has the best educational system in the country. And yet people like me tend to leave in droves as soon as opportunities arise for them elsewhere. So that’s kind of general problem one.
The second problem is just as insurmountable. The amount of capital that is required to make a semiconductor fab facility is absolutely massive, even if it is “only” the 28 to 40 nanometers that this facility was supposed to build. Now, 20 to 40, that’s like a very low end tablet, or a mid range internal combustion vehicle, or a really, really, really, really fancy something for the internet of things. So, what I kind of consider bread and butter chips, but nothing too crazy.
That said, these facilities still run in the billions of dollars, oftentimes topping $10 billion, if you want to do them at scale. That’s a lot of cash for a system like India. Now India is a very large economy because it has a lot of people and it’s a big place, but even the largest of the Indian conglomerates tend to get dwarfed in this space by the middle players in the tech space internationally just because the level of capital is so difficult. The effort, the skill set, the labor force, the command of details that it takes to do something like this requires a massive organization and a metric shit ton of capital and that is just not something that the Indians are very good at.
Now, does this mean that I think that the whole idea of shining India is a farce? Yes, but, let me explain that. So before all you Hindu nationalist writing about what a hateful person I am, I think India’s future is golden. India is the first stop out of the Persian Gulf, they never would have an energy crisis. Companies like Reliance Industries have shown that India can dominate heavy and mid industry. Whether it’s chemicals or agriculture or industrial materials, India is an excellent place to get stuff done. It’s got a multifaceted labor force, it’s going to make a dominant in manufacturing especially as the Chinese have more and more problems. They showed with COVID that they could develop their own vaccine that works unlike the Chinese one, which is utter crap.
India has a very bright future, it never globalized under the American led order, so as globalization breaks down, India is going to broadly be fine. But India is going to do things for India, by India in Indian ways, and that’s a negative as much as it’s a positive. Capital flight will continue to be an issue, technological acumen will continue to be a problem in the workforce. So India is perfectly capable of ruling its neighborhood and doing very well for itself, and yet not being a technological power. These are two very different things. So bet on India? Yes. Bet on Indian semiconductors? Probably not. All right. That’s it. See you guys later.
