BackHardware innovation: Why’s it so hard in India?
Despite govt policies to encourage manufacturing, few entrepreneurs have emerged to take on the challenge
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Bangalore: Like most entrepreneurs in Bangalore, Mir Abid Hussain builds software. But his software comes with something unique—a sleek computing surface that can be affixed to tables. His company, emo2 Inc., is now testing the product at select Cafe Coffee Day locations, where visitors can swipe through interactive magazines, videos, games and food menus.
“It’s a big risk," Hussain said of his three-year-old venture. “But it’s a good risk, because this is an industry where nobody is there."
After departing his first start-up, a software provider, in 2006, Hussain moved to Taiwan to learn hardware innovation. With emo2, he soon plans to take his computing surfaces to shopping malls, luxury retailers, bars and restaurants. While he is looking at Dubai, all immediate potential business customers are based in India.
Very little of his device is. The hardware is made in China and the intellectual property for the company, including seven pending patents, is registered in the US.
“We’re mostly a software company," Hussain said. “We can’t make this in India."
While Google Glass and other newfangled devices are sweeping Silicon Valley, hardware innovations such as Hussain’s computing surface have barely registered in India despite the government introducing a clutch of policies to encourage domestic manufacturing and, in turn, new hardware companies. Yet very few young technology entrepreneurs have emerged to take on the challenge, largely because the supporting infrastructure is virtually non-existent.
“India can follow and be a late, late follower to China, and lose the game," said Sanjay Nayak, co-founder and CEO of the telecom manufacturer Tejas Networks. “Instead of thinking we missed the boat in hardware and we’ve made it in software, we should think, ‘What is the next big thing that India can do across any sector in the economy?’"
That thing could be “electronic systems"—a hybrid product that plays to the nation’s engineering strengths. As an example, he cites his own 13-year-old company, which he says is 60% hardware.
“What we physically ship is a piece of hardware," he said. “But if I were to look at where the significant differentiator counts, it’s in software."
However, for systems firms, which require significant scale to stay afloat, striding out into the marketplace isn’t easy.
Last year, Gandharv Bakshi, a former salesman for Tejas Networks, started Lumos, a company that builds solar-powered backpacks which charge mobile phones. The hardware is costly and finding ready consumers for their pricey bags, as Lumos is just beginning to do, will prove difficult.
Bakshi has found little help in Bangalore, a technology hub dominated by software coders building Internet companies. “When I go to the start-up events, I feel very lost," he admitted.
That network of hardware knowhow will only come with a broader base of local manufacturing, said Rajan Anandan, managing director of Google India, who has privately invested in several start-ups, including Lumos and emo2.
“The reason we’re seeing incredible software innovation is because we have 3 million software engineers," he said. “At the end of the day, start-ups are built by engineers—it’s skills-based."
By 2020, the central government estimates total electronics imports will grow six-fold to roughly $300 billion. To ease that rising import burden, the Centre and state governments are seeking to facilitate the emergence of a domestic hardware industry. In October, the Department of Electronics and Information Technology released its preferential market access policy, which includes upwards of $2.75 billion worth of incentives for electronics manufacturing. In 2010, Karnataka drafted rules to attract and boost semiconductor production in the state.
Government funds allotted for electronics have arrived very gradually, said Vishwakumara Kayargaade, CEO of Saankhya Labs, a Bangalore-based semiconductor company backed by Intel Capital. Taxes too, he said, adversely impact firms like his. Tax breaks for IT services are plentiful as companies can quickly make profits. But this is not the case with product companies, particularly hardware makers, which need significant upfront investment in research and development that may take years before returns materialize. Nayak, who has helped shape policy at the central and state levels, sees the recent decisions as moves to level this imbalance. Yet, until hardware production spreads, start-ups will have to invest in the costly move of going abroad for partners in locations such as China and Taiwan, where Saankhya Labs has its foundry. That capital obstacle has made financiers reluctant, some entrepreneurs said.
“People have told me you have to go to 30, 40 investors before you actually get an angel investor onboard for a hardware start-up," said Bakshi.
But his angel disagreed.
“In India today, there’s enough early-stage funding for good entrepreneurs with interesting ideas," said Anandan. “I don’t see any ideas. You can’t fund someone you don’t know."
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