Three little pigs

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(Note: map is not representative of national boundaries)

I was recently in discussions with a delegation of an Asian telecom equipment manufacturer. I was drawn into thinking about my favourite topic – telecom manufacturing base in India and, a comparison with that of two other Asian giants, China and Japan – truly a story from our kindergarten days, about the three little pigs!

The Story Of Japan

Looking into the past, one cannot forget how Japan, a war ravaged nation, rose from its ashes after WWII and, despite the telephone industry being state-owned until 1980s, was a superpower in the field. Although Japan, today has the most advanced communications infra in all Asia perhaps, they lost their chance for world dominance, maybe, on account of a few factors.

An insular system manufactured equipment to their own standards without aligning with the world. Maybe they believed that the world was of lesser quality than their own. Perhaps so – but this also meant that their solutions had to be re-engineered for overseas market making it costly. And, for a small country that they were, domestic demand was bound to saturate.

They also didn’t read the change of winds when the Internet era dawned. Silicon Valley startups upstaged both Europe and Japan in the 90s, although Europe could roll out mobile technology across the world quickly (standards orientation helped) and corrected their course.

The Story Of India

Call it foresight – but long before the 1980s, India had a capable manufacturing base for telecom equipment. In the hands of the state-owned ITI who, despite their monopolistic sluggishness, helped in establishing the base – supply chains, production facilities and skilled population – capable of manufacturing digital exchanges.

In the mid 80s, with the first wave of telecom revolution and the creation of C-DOT, a robust non-state manufacturing ecosystem emerged like never before – from mechanical assemblies to microelectronics. However, all this was undone in subsequent waves of Government policies.

Rising foreign debts forced the Government to “liberalise” the economy by opening certain industries to foreign competition in early 90s. Indigenous capability in telecom was assumed to be strong enough to withstand competition and was hence opened up. However, this turned out not to be the case.

A tragic fire accident in 1988 at SCL, Chandigarh – the main microelectronics manufacturer in India – made local manufacturers extremely dependent on imports when it came to electronic chipsets, one of the most important ingredients for telecom equipment. The Indian manufacturers were also not used to live in a liberalised world and the sudden influx of US, European and Japanese (Fujitsu) giants made some of them close shops.

The Government opened up domestic demand by allowing private service providers in the mid-90s. But vested interest and labor unrest in the Government owned PTT resulted in opening up wireless technology where there wasn’t much indigenous capability. Although this made the economy roar into life, this sounded the death knell for indigenous manufacturing capability.

The Story Of China

The most famous manufacturer of telecom equipment from China, Huawei, was founded in 1989! The youngest telecom company has graduated from being an outsourced player, reverse engineer to a technology front-runner across the world. They have now started shaking up the established players of 80s and 90s in their home countries too!

They don’t owe it free-market forces nor inventive genius. They don’t even owe it quality of products. It has simply been consistent Government policy with foresight and great domestic demand (like in India).

In Conclusion
I am sure that, by now, the reader is clear about which little pig’s house stood up when the big bad wolf came and huff’d and puff’d.

I also wonder what would be a good course correction for the two other little pigs other than to take shelter with the third little pig!

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