Big Tech Drives South. The Road Goes Through India.

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. Reliance Jio, a very Indian sort of national champion, may benefit most.

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. India offers a huge online consumer market (500+ million and growing) as well as a broad and vibrant tech sector. India also has a track record of playing superpowers off each other.

But one particular Indian company may benefit most. Mukesh Ambani’s Reliance Jio, a very Indian sort of national champion, has become in recent years by far the largest mobile carrier there by offering high quality at low prices. Its goal: become a peer of China’s Huawei, Alibaba, and Tencent.

The arc of Indian history bends toward non-alignment. India’s tech sector had its official birth in reaction to a border war with China in 1962. The government then urgently undertook state-led programs in computer development and related fields. It had notable successes–a space program and nuclear weapons, for example. But it never made much progress in semiconductors or other state-of-the-art hardware manufacturing. Its most notable industry success was the creation of a robust and globally competitive private software and services sector. That industry benefitted from national regulatory reform and warming relations, first with China after 1988 and with the U.S. after 2000.

India’s security establishment remained deeply wary of China, but bilateral relations put ongoing disagreements about the two countries’ common border in one box and commercial matters in another. While Indian security services warned for years against using Huawei and ZTE technology, the country’s telcos felt they didn’t have much choice because the gear was so much cheaper than Western alternatives. So, much of India’s network, both fixed and wireless, was built by Chinese companies.

The years 2014-16 saw three related extraordinary events. First was the arrival of WeChat, owned by Chinese colossus Tencent. Use of the service quickly soared, but after warnings that data might be misused by China, just as quickly declined. Then came Facebook Basics, a way to give mobile users cheap or free internet services. It had the endorsement of Indian Prime Minister Modi but aroused deep opposition from India’s growing tech companies, along nationalist lines. It also faced strong resistance from Indian activists, who accused the company of violating “net neutrality.”

The third and perhaps most consequential development was the arrival of Reliance Jio’s 4G services with free data, in 2016. After years of quiet preparation, Jio boldly declared its ambition to bring mobile internet and infrastructure to the entire subcontinent, a seemingly absurd goal. But Jio, led by Ambani, India’s richest man, made it believable by 2019.

Ambani’s Reliance Industries was the industrial behemoth of India, founded by Dhirubhai Ambani, initially in textiles. But upon his death, Dhirubhai did not leave a will. As his famously contentious sons, Mukesh and Anil, carried on the business, their interests and activities clashed. A solution brokered by their mother in 2005, including a ten-year noncompete clause, resulted in Anil getting the telecoms business. Mukesh worked away at less glamorous businesses but was laying his plans for telecoms. When the noncompete expired, Jio went all in on Silicon Valley style, with quirky campuses and ample compensation for top talent. Unusually for India, it began making its own hardware as well as software. By 2019, poor Anil’s company, Rcom, was filing for bankruptcy and the younger Ambani was being hounded by his state-backed Chinese creditors.

But Mukesh was just getting started. He always positioned Jio within a global frame. In 2017, he declared that what had taken the West 300 years, and China 30, India would achieve in 10. He argued that India’s relatively open and fluid system would be both more successful and more emulated than China’s, which he described as centralized government by the few. The next year, he also accused Western companies of “data colonialism,” insisting that Indian data should stay in India. In February 2020, he assured President Trump that Jio’s network “doesn’t have a single Chinese component.” (Jio’s main infrastructure partner has been South Korea’s Samsung.) Mike Pompeo hailed Jio as the rare example of a “clean network.” Ambani wants to be seen as taking his non-alignment seriously.

In fact, Chinese technology and investment has been essential for at least one critical part of the Jio ecosystem: its JioPhone, which has sold some 100 million units. An advanced feature phone offering smartphone-like Internet access without smartphone prices, the JioPhone runs on the KaiOS operating system rather than Android. “Kai” is derived from the Chinese for “open,” as in open source. KaiOS was spun out of China’s TCL, a company better known for televisions, and based upon a now discontinued open-source Firefox operating system called  Boot to Gecko (B2G). TCL was the main shareholder of the company building KaiOS. Jio more or less gave away its phone, including a data plan, aiming to make up losses with services and subscriptions later.

Some of TCL’s shareholders, including its largest one, are Chinese state funds. KaiOS is thus connected to the Chinese government. So Jio’s claim to be China-free needs to be qualified. KaiOS’s other main shareholders are Google (which invested $22 million) and Sino-French investment fund Cathay.  

KaiOS until very recently has been designed by default for Qualcomm and Unisoc chipsets, the electronic heart of a mobile device. Unisoc is the chip-making unit of Chinese state-owned Tsinghua Unigroup, which is heading up China’s effort to reach semiconductor independence, notably for 5G and AI.  Unisoc chipsets  in the JioPhone would certainly qualify as a “Chinese component.” Jio has at least been switching to a chipset from Taiwan’s Mediatek for its newest phones. Meanwhile, according to Digitimes Research, KaiOS has moved more toward Unisoc chipsets, and away from Qualcomm, as it explores untapped markets in Africa, Indonesia, Brazil and Ukraine. There are no virgins in supply chains.

Now the India-China split has redounded even more to the benefit of India’s tech sector, and to Reliance Jio, because it has recently received spectacular investments from American companies. In its biggest bet since WhatsApp, Facebook spent $5.7 billion in April for 10% of Jio. Google, in July, put in $4.5 billion for 7%. Qualcomm and Intel made smaller investments. All want to grow in the Indian market in partnership with a new player that is clearly adept at navigating the political as well as commercial dynamics. China-India border clashes in June suddenly gave these investments an even more political cast. One Indian government response to the fighting was to ban popular Chinese apps and freeze Huawei’s and ZTE’s participation in India’s 5G rollout. This was a huge blow to both companies.

But what is most interesting about this American surge into Indian networks, and perhaps most threatening to China, is that it could go way beyond India. In recent years, China has basically owned the developing-world mobile market. Africa, Latin America and Asia, including India, have become less poor thanks to the 20 years that China spent underwriting their  networks. But Jio and allies ultimately aim to take much of this market away from Huawei, ZTE, and other Chinese companies like Transsion.

The Jio sweetspot — an affordable semi-smartphone with Internet access and apps — has become a massive global market opportunity. Jio’s partnerships with Silicon Valley companies and its deep relationship with Samsung are important geopolitically. They represent a way to reduce China’s global telecommunications presence. Google, for example, has long tried to market a special OS called AndroidGo for stripped-down smartphones, without great success. The Jio partnership, powered in part by KaiOS, is an alternate way forward. Google, as always, is playing on several levels: AndroidGo is in a new Samsung phone poised to take middle-market share from Jio, among others. (Samsung dominates Indian handsets in addition to being Jio’s main infrastructure partner.)

But the throughline is clear: big tech is moving South. Thanks to the US-China conflict and the rise of Jio, the road seems to go through India.

Related Posts
See All

Citing Wildfire Risk, State Farm Will Stop Selling Home Insurance in California

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. Reliance Jio, a very Indian sort of national champion, may benefit most.

Phoenix: Leading the Way in Autonomous Vehicle Technology with Waymo

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. Reliance Jio, a very Indian sort of national champion, may benefit most.

Should We Pull Carbon Out of the Air with Trees, or Machines?

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. Reliance Jio, a very Indian sort of national champion, may benefit most.

What to Read: Silicon Heartland–Transforming the Midwest from Rust Belt to Tech Belt

India is artfully positioning itself to be a beneficiary of the tech conflict now accelerating between the U.S. and China. Reliance Jio, a very Indian sort of national champion, may benefit most.