Today’s video comes to you from the base of Saint Mary’s Glacier in Colorado.
With semiconductors top of mind for everyone, let’s dive into India’s tech industry and see if they can cement their place as a tech powerhouse. Despite government incentives for tech investment, big players like Foxconn are still pulling out of multi-billion dollar plans.
This isn’t a corruption or infrastructure problem. It’s just a case of brain drain – meaning the Indians in this talent pool pursue (more lucrative) opportunities outside of India once they’ve reached a certain skill level. Without a talent pool to choose from, everything else falls apart.
The second problem for the Indian tech space is capital. If you want to build a semiconductor fabrication plant, you better have some deep, deep pockets. Despite India’s size, its pockets just aren’t deep enough to be a world leader in tech.
Does that mean it’s all downhill for India? Absolutely not. The Indians have proven their dominance in several areas, and the collapse of the global order won’t impact them like most countries. India’s future is golden, and they will be a major world player…but their tech industry isn’t going to be why.
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Hey everyone. Peter Zeihan here coming to you from the foot of the Saint Mary’s Glacier in Colorado. Today we’re talking about Indians. Semiconductors and tech in general. In the last week, well, maybe two weeks by the time you see this, Foxconn, the big semiconductor company, pulled out of 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 in any government, I guess has put up $10 billion in order to attract investors into the tech space. And the pull out 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 I.T. 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. It’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 midrange 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 there’s 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 no more. Yes, but let me explain that. So before all you Hindu nationalist writing about it, what an evil person I am. I think India’s future is golden. India’s the first stop out of the Persian Gulf whenever you have an energy crisis. Companies like Reliance Industries have shown that India can dominate heavy and mid industry whatever its chemicals are agriculture or industrial materials. India is an excellent place to get stuff done. It’s got a multifaceted labor force that’s going to make it 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 other. Well, India has a very bright future. They’d 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 is a positive. Capital flight will continue to be an issue. Technological acumen will continue to be a problem in the workforce. So India’s 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. Alright. That’s it. See you guys later.