Make In India needs Fab In India First

In today’s world electronic parts plays a great role in almost all kinds of product. Be it consumer products like mobile phones, tablets, smartwatches or many other gadgets or industrial products like sensors, network swtiches, power controls, home automation or the upcoming IOT revolution. Ubiquitous usage of electronics in products is known fact.

Chip manufacturing is a very specialized field which is more or less absent from Indian manufacturing scene as of now. Chip manufacturing facilities are normally called “Fab” or “Foundries”. A typical fab takes more than two years to build from the scratch and investment of over billions of dollars ($3-$4 Billion investment is very common)

Major fabs/foundries are spread across USA, South Korea, China, Japan, Taiwan, Singapore and few other European countries. Most of these companies have made huge investment in building these world class chip manufacturing facilities. It can be seen from figure below and there isn’t one in India.

fab_world_map
Fab/Foundries Around the World

Fab ,as it can be seen, is a huge investment with massive infrastructure requirement. Also every 18 months there is a recurring expenditure to upgrade the Fab due to change in node and technology. There are not many players in world today who are ready to invest such huge investments themselves. Most of the companies are using common facilities like TSMC or Global Foundries as they cannot bear such huge costs sustaining these facilities. Intel is one major semiconductor company which still maintain there own Fab.

I think with all this information it is very clear that making a fab facility and maintaining is not that simple one and need lot of commitment in terms of investment in infrastructure as well a very specialized man power (mostly fabs are automated and hence they don’t create lot of jobs).Currently India imports majority of semiconductor needs.

So what is the status as of now in India, as per my research of publicly available document Indian government is keen on developing Fab in India and there are possibly two Fabs being planned as of now. One in Noida, UP where Jaiprakash Associates in collaboration with Tower Semiconductors (operate the fab) and IBM (technology for CMOS manufacturing process ) but lately it has been in news that JP Associates has pulled out and this project has gone into jeopardy as government and other partners are looking for investors . Another one is being planned by HSMC (Hindustan Semiconductor Manufacturing Company) in Prantij, near Gandhinagar, Gujarat with ST Microelectronics (probably technology partner) and Silterra (operating the fab). This project has also got support from AMD and looks to be in better shape. There is some news also regarding Cricket Semiconductor that wants to start a pure play analog foundry in Indore, Madhya Pardesh.

All these three fabs have been in news but it is not very clear how and when these may become operational. Since this is very capital intensive and the chip industry as such has overcapacity globally so raising money has been of great concern.

As chip manufacturing is generally getting outsourced and many successful companies have moved to Fabless Manufacturing retaining the design of chips in house and generating IPs. ARM is one such company that has its processor core in 99% of mobile devices but does not manufacture their chips. So if this condition lingers on for a while the enthusiasm may go down and there may be push to get into design and develop IP and rather than getting in to hugely capital intensive chip manufacturing.

But as far as Make In India is concerned and if we really want to make a dent in the global market these Fabs would be in the core. Once Fabs are operational, manufacturing of printed circuit boards and assembly would also pick up and world class facilities would crop up in order to utilize the availability of local resources.

Hopefully Modi Government realizes this and if the groundwork is not completed and construction of kick started they may not see this operational by the end of their current tenure and Make In India will remain as a fancy name with companies just taking advantage of these by importing knocked off units and assembling it India which is a very low value add in the whole ecosystem of products.

Advertisements

Stale e-Commerce Sale Branding

 

All the e-commerce players are trying to create an atmosphere of “sale” during the festive season and get customers to buy stuff that they don’t want. The three big players Amazon, Flipkart and Snapdeal have been following a very similar strategy and there isn’t any difference between their showcasing of deals.

I have not seen other newspapers but Times Of India Bangalore edition of 2nd October had probably six pages of full page advertisement of Snapdeal, Flipkart and Amazon before actual newspaper started. I think they were in the same order. Looks like this had become a minimum benchmark for  e-commerce players to feature full page advertising on leading dailies. As per Quora post  a full page advertisement can cost INR 1.5 Crore (15 million) for a an edition that has lot of readership in a metropolitan area. So in any way this is nowhere cheap and when all are doing the it makes all the more difficult to really stand out.

Also if you have been monitoring the price, many of the 70% off are actually on the hiked price before the sales which is an old technique used by brick and mortar shops for long. I have bought stuffs from Amazon and Flipkart and don’t think have actually got any better deal as to normal off deal time.

To me it looks like half hearted attempt just to create buzz around the market and get people who have not been doing online shopping much.

I feel there is definitely a scope for a product that helps in price discovery (buyhatke is one which has been trying to do something on this)on the online sellers like these tracking historical prices and helping customers to actually make a judgement as to what is actually a deal and what is actually a farce.

I also imagine if offline price discovery can be brought into it will be great for the customers as many times I am seeing these days the deal turns out be much better the the online retailers.

Unless there is a earnest desire of these e-commerce companies to rise above these stale branding campaigns where they are spending lot of money and the actual customers are in no way getting a better deal.

Hopefully we will have some better product for price discovery  so that the e-commerce players will consider Indian market more mature and we will get really good deals 🙂

Ringing Bell’s Freedom251: Reality or Fallacy

Sometime back checking news online, I came across this eye catching news item where it talked about a smartphone for in INR 251 (under $4) and it got me excited as Aakash tablet did some years back. I had ordered Aakash (didn’t get one though) then and I was looking to order to Freedom251 as well.

I believe that any “for profit” private entity would never sell its products without making profits. Lets assume that Ringing Bell Pvt Ltd   is making profit one or the other way. I will try to figure out the price of INR 251 by looking at their specifications for their phone Freedom251. I will try to make a case of building a Bill of Materials for the phone with these specification in mind and bulk quantities. These are just indicative prices of the parts based on my scrubbing online prices and assuming huge economies of scale. There are other costs like pcb, mechanical, assembling, branding that needs to included. There will also be other NRE and software development costs involved.

 

chart2
Bill of Materials

The BOM comes to $12.6 which is little over 800 rupees (1USD=INR67)

So as per the pricing at COGS, profit doesn’t look like feasible and they will be selling this product at profit. And in the business of selling smartphones there isn’t much available in terms of business models where money can be made.

So to me it looks more like a Marketing plan to buy cheap devices <3K range and probably hand over to few customers at INR 251 to create hype. I myself tried registering on their website multiple times but it just took my details and page refreshed without accepting my order. I haven’t heard anyone who has booked a phone. Please comment in case someone has been able to book a phone.

Their claim is that they have received 25 Lakh registration and initially it was only advance payment. Later they are started COD as well. The tried to create authenticity by getting Indian government into the loop and using “Make In India” ,”Start-up India” & “Swach Bharat”. They also tried to get some press with news stating that India’s Defence Minister Manohar Parikkar and another BJP senior leader Murli Manohar Joshi  who actually turned up for the launch event.

The jury is still out and lets see if these guys will be able to deliver. I will update this post again in after June when the claim to be shipping their devices.

As of now to more it looks like a fallacy but I will still hope that they deliver their promise.

 

Zika’s Unexpected Victim is another Zica

This is the colossal story of brand that went totally wrong of reasons that cannot be predicted or forecasted or controlled.

As per the news reports Tata Motors’ new car launch that was in plan for more than two years was an acronym from “Zippy Car” and it was creatively named Zica. All the communication that were being done for this new car were based on Zica. Zica was showcased in the  auto expo 2016 and was getting launched with all the dealers across India getting ready to take orders.

Unfortunately during the start of 2016 widespread outbreak of Zika virus was reported in the Americas starting from Brazil and then spreading to other South America, Central America, Mexico and Caribbean countries. Zika virus infection results in Zika fever that is minor illness and causes fever and rashes but there has been some correlation established newborn with microcephaly due to pregnant mother to child transmission of this virus. Microcephaly is a condition where baby’s head is much smaller than normally expected. Microcephaly can occur because a baby’s brain has not developed properly during pregnancy or has stopped growing after birth, which results in a smaller head size. WHO declared this Public Health Emergency of International Concern.

Zika virus gained lot of press coverage and there were TV footages of infants suffering from Microcephaly which creates a very negative image on that name.

Tata Motors Branding Team would have never thought this in their nightmare that something like this would pop up. Unfortunately if someone of the team would have googled and probably they may have found that there  is seems to be cousin called Zika which is a virus isolated in 1947 in a Rhesus monkey in a forest near Entebbe, Uganda and there has been only 14 documented Zika virus human cases until this outbreak. Even if there was one soul in the team who may have pointed to this, which I really doubt, but with everyone agreeing to the name that person’s idea would have been shot down for sure.

I think one learning that any new branding effort is to make sure that atleast the name is searched globally for any viruses or diseases or any sort of that negative stuff. I guess there is nice small product idea that checks the databases  and brings out any warnings or signals that may save situations like these. Probably there is one database like that already but I am not aware as of now so anyone who knows such a product can please comment. Otherwise there is an opportunity for a product to be made.

Tata Motors would have saved millions if someone would have warned them and probably they have named it Zippy or Tiago which is going to be the name now.

Zika has affected Tata Motors like the same way it is affecting the kids fortunately Tata Motor could change the name and limit the damage but the kids affected by Microcephaly may not have that chance.

 

Bitcoin 101

I was  quite unaware of Bitcoin just a month back but fortunately I met someone who has actually worked for Bitcoin exchange. Last week of December was vacation from office and I was looking for something to spend my time on. I wouldn’t claim that I know everything today but I am much better of. Here is a write up from my more than a month research, hopefully it may help people to get started.

Satoshi Nakamoto is known to be the founder of bitcoin. He released  a paper in cryptography mailing in 2008 list describing the bitcoin digital currency and then released the source code in 2009 which was made open source. Satoshi was very active with the development community until mid 2010 after which he disappeared from the scene completely handing over it to others. His last message was “I am not Dorian Nakamoto” on March 2014 against the Newsweek article that states Dorian S. Nakamoto was the real Satoshi Nakamoto. Till today nobody knows if Satoshi existed or was it pseudonym used by a group of people or individual who created the bitcoin. Since the C++ source code is open, many experts have analyzed it and are really amazed by the skills of Satoshi or the group that developed it but suspense remains even today which draws people towards bitcoin.

I will use Satoshi henceforth to mean the founder of bitcoin. The source code is open whereas the people behind the development are elusive, similarly the transaction are open but the individuals behind the transaction are elusive. The basis of bitcoin is the peer-to-peer network without involvement of any trusted parties. The fiat currencies like dollar, rupee or any other currency supported by national banks works because of the trust. All transactions are confirmed by the trusted parties which are the banks that charges the user for any transactions. Banks charge us for the trusted network that they provide.

The concept of bitcoin was revolutionary and is based on two important elements called blockchain and mining. Blockchain is the ledger which contains all the transaction that has happened with bitcoins. Any bitcoin node will download the complete blockchain and any transaction has to be downloaded and approved by atleast six nodes before it can be assumed as correct sequence of blockchain. Nobody can include false transaction as others on the node will reject the blockchain and the transactions will not be valid. In the initial days it was easy for people to install bitcoin node on a computer and then start mining which is the process through which the transactions are verified and the miners are rewarded based on a fixed formula. Nowadays it has become more competitive and specialized hardware is available that are faster in processing the mathematical calculations and wins over any other generic machines.Also based on investment required a full fledged computer nodes isn’t viable due to hardware costs as well as electricity costs. In total there are 21 million bitcoins that can be mined, this limit is set in the code and more than 15 million has been mined already. Mining can be compared to something like renting out your bike and receiving some money from the user. Miners makes the transactions secure by competitively performing the mathematical transactions in order to ratify any new transaction which is normally the job of bank. The current blockchain size is over 53GB,which is the size of the blockchain to be downloaded by someone who wants to start a new full fledged node today. The initial 50 coins were mined by Satoshi himself and is called the genesis block now. Because of this reason bitcoin is sometimes compared to ponzi scheme where the old investors are paid from the money gathered from new investors and the whole scheme fails if there are no new investors and there is no underlying business that generates revenue. The counter to this point is the early adopters of bitcoin did make an investment for which they are getting paid now or in future. Its like investing in a startup.

Once there was a critical mass of people having bitcoin and businesses accepting bitcoin, the transaction was very simple as each node has its own address and wallet attached to it. So a transaction was just a message from one sender to other which had to validated by the peer-to-peer network to stop any double spending. Once the bitcoin is spent its gone forever just like cash. Bitcoin was gaining traction as many hotels, online websites like wordpress started accepting bitcoins. Wikileaks also got contribution in bitcoin world over when their account were seized.

Bitcoin exchanges started and the first one was Mt. Gox where bitcoin can be bought/sold for various currencies. There are numerous bitcoin exchanges that has mushroomed all over the world.

Bitcoin is highly decentralized and nobody owns it. Every node has a part to play to keep the network secure.Transactions can be made anonymously to anyone around the world without depending on any centralized system. This is both good and bad as the government around the world needs to know how the money is being transferred in order to avoid money getting used for terrorist activities or unlawful activities. All conventional banks need to have “KYC” for all their customers updated which isn’t the case with Bitcoin. The biggest example was Silk Road which was a marketplace for selling illegal drugs in the US and was accepting payment only in Bitcoins  using the anonymity of users behind the transactions for their benefit. Bitcoin is a innovation that most of the government banking institutions don’t know what to do with. Many countries do not know how to classify bitcoin and other virtual currencies and how the taxation mechanism needs to created.

Satoshi’s innovation has created a revolution and has the potential to change the way banking transactions are done.

As of writing this article 1 Bitcoin is around $391 but this value fluctuates wildly and bitcoin market is full of speculations. Bitcoin has much more behind the scenes but probably this gives an insight for someone who wants to get started.

I have experimented with OK Cash wallet on Raspberry Pi but even after 5 days in network haven’t been able to get any coins. Probably my raspberry pi isn’t able to compete with other nodes in the network.

If you need any help with Raspberry Pi and ROKOS please refer to the following link. In case of any queries leave me a comment I will try to answer if I can.

Disk Drive Industry: Is it getting disrupted?

In 1996 when Clayton Christensen (Author of The Innovator’s Dilemma, a book that deals with his seminal theory of Disruption) was researching on why the best firm fails, his Professor gave a sage advice “Those who study genetics avoid studying humans, because new generations come along only every thirty years or so, it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because they are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see”

This has been very true for a long time in the storage industry particularly the disk drive industry where changes in technology, market structure, global scope and vertical integration have been very prevalent. There has been more than 200 companies in the past in manufacturing of disk drives and today that number is only 2, Seagate  and Western Digital after lot of acquisitions and bankruptcy. The disk drive technology is matured and has really reached its potential in terms of density and speeds. I am no expert but probably disk drive technology deals with physical movements and mechanical heads and that is why it is reaching sort of its limits. What used to be size of a room for a few MB of memory size has been reduced to size of human palm for 1TB of memory size which is tremendous growth in less than 50 years of timespan. It is said that the disk drive companies uses around 25 elements of periodic table and manufacture drives which is quite amazing. The disk drive industry has changed from a thriving industry with lot of investment in R&D by multiple big and small players to a duopoly of two companies Seagate and Western Digital and both of the facing the heat of stagnating market growth & technology, commodotization as well as threat from technologies like solid state drives that have very different players like Intel, Samsung, Sandisk,Micron and others who have either divested their disk drive or were never into storage. With Western Digital acquisition of Sandisk that are into Solid State memory there is every possibility that the R&D dollars going into Disk Drive will definitely go down further bringing down innovation.

Lets see now Clayton’s theory that was a result of analyzing disk drive companies applied to today’s disk drive industry that is way different from what it used to be.

The basic tenets of Clayton’s theory is that the incumbents are always winner in sustaining innovation whereas entrants are always winner in disruptive innovation. Idea is incumbents like Seagate or Western digital will be doing sustaining innovation for their customer, charging premium and increasing their margins, the possibility of a new player taking a great market share by doing sustaining innovation is quite remote. Disruptive innovation has the characteristics atleast initially lower gross margins, smaller target markets and simpler products and services that may not be attractive with traditional performance metrics and hence the  incumbents are not  interested to play in this lower margin business creating space for new disruptive competitors to emerge.

Solid state drives aren’t as complex as the disk drive technology as it uses NAND Flash Memories and a controller that provides access to these bunch of NAND Flashes and does other housekeeping tasks like wear leveling, command execution. Both Seagate and Western Digital have put stakes on solid state memories and as of now the SSD aren’t simpler than disk drives and comparatively higher costs. Accordingly it doesn’t looks like a disruptive technology rather a sustaining innovation where incumbents have possibility of successfully tapping the market as well.

With the performance metrics in terms of IOPS much better for Solid State memories than that of disk drives their usage from client based system to enterprise systems would happen only when these drives meet the reliability with the performance enhancement. The industry standard NVME drives that are going to make all the solid state drives compatible will also make their usage easy.

The disk drive industry has come full circle and the two companies surviving the competition are the ones who were pioneers in the development of the technology and it will be interesting to see how these companies sustain themselves with their core technology in danger.