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Building An IoT Startup For Self-Reliant India – Profit From IoT

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The IoT market has seen a burgeoning growth in the past couple of years, with estimates suggesting what could be a $20 billion market by 2024. Naturally, a lot of budding entrepreneurs are looking at the IoT market with great expectations. But what are the challenges that IoT startups would face in a self-reliant India?

Once viewed as a technology of the future, the Internet of Things (IoT) has become synonymous with everything smart. Across the globe, smart devices are already directly or indirectly dependent on IoT.

The Indian government aims to reduce imports and turn the country into a manufacturing hub. This has created innumerable opportunities for startups to fill the gaps and make the country self-reliant. But the task is not so simple and would need lot more effort than one would assume.

Opportunities

While smart appliances are lucrative, their field has become saturated with many players venturing in that direction. Yet, the segment provides enough room for innovation given how consumer needs and demands are changing in the wake of the pandemic. With the government’s zeal to drive the 100 smart cities project, the number of areas to tap for IoT startups is quite good.

Sanjeev Keskar of Arvind Consultancy says, “The opportunities in the IoT field are huge right now as everything is becoming smart and connected. Be it smart parking, lighting, or signalling—the opportunities to aid the government’s vision of a connected India is innumerable.” Under this purview of the government’s vision, the target of installing 250 million meters by 2022 and the demand for IoT based applications like smart grids, smart energy meters. and solar pumps is humongous.

Adding to this, autonomous vehicles are also a new and exciting sector that is slowly taking shape. Even while the world parades over electric vehicles, it is clear that connected mobility is emerging as a star of the show. As the frenzy for connected mobility slowly picks up pace, automotive companies would be on the lookout for smart component makers in the IoT field to help them achieve their vision. With India being a leading player in the automotive industry, making use of the ‘first mover advantage’ would ensure both growth and sustainability to all parties involved.

At the same time, industrial IoT is also booming considerably as most industries have now identified how a connected workspace can assist the growth of their business. With the help of IoT, many companies are skyrocketing their method of work. The good news is that every industry has a unique requirement, and no company will have a standard module to get into the industrial IoT space. This would force them to look for SMEs and startups to customise from the given requirements.

Challenges

Even while the IoT industry is piled up with opportunities, only a few startups end up making the cut and being able to scale beyond expectations. Keskar breaks down some of the generic issues startups often face.

The first and the foremost is that startups lack a good understanding of all the technology options available for their product, which eventually leads them to doom when it goes out into the market. “After working for a year or two, they realise that their product is neither meeting the commercial expectations of the end market nor it is meeting the technical requirements. Unfortunately, by then it is too late,” he adds.

As we know, an IoT product has a set of basic building blocks necessary for its functioning—the device, connectivity module, and the cloud. The crucial components for the product are semiconductors, printed circuit boards (PCBs), and surface mount devices (SMDs).

Keskar notes, “If you ask me, the most important aspect in manufacturing is that we need to focus on creating a high value-added ecosystem.”

He goes on to say, “If you just do electronic manufacturing service (EMS) activity, only 10-15% value of that electronic product is realised. However, analysing the value chain of any electronic product shows that IP and technology contribute 40-50% and components like PCBs, chips, displays, etc contribute only 30% value to the value chain.” Unfortunately, in terms of semiconductors, our country is far from being self-reliant given how dependent we are on imports.

“It should be worrying us because as an industry I believe everybody has accepted this status quo, that we are going to be dependent on imports coming from China, Korea, or Taiwan for even small components like SMD resistors. So, the major question here is that, can we really create this $20 billion opportunity while being dependent on imports?” asks Arpit Chhabra, CEO & Co-founder, IoTfy.

Even while the government has recently shown interest in building the country to be part of the chip manufacturing crowd, we can assume that it would take a substantial amount of time to completely quit relying on imports and truly become self-reliant first even before thinking of exports.

Chhabra adds that the missed opportunity, when the chip industry across the globe was still nascent, set us back in years. He says, “At this stage, we are stuck because for the last 15 years we couldn’t move. Companies like China, Korea, and Taiwan have really scaled up their capacities during that time and now supply to countries globally.”

Solution

India, today, either acts as a design centre or service unit for global companies, but there are very few product companies. This implies the need of the hour is creating successful product innovation companies from India. “It is in the national interest that unless we create for the local market and global market, we are not going to recognise that 40-50% value, which product technology or IP amounts to. So, our focus has to be on creating local product innovation,” emphasises Keskar.

To achieve this, a strong policy framework that supports the vision and goes hand-in-hand with the demands and requirements of the industry is needed. “A semiconductor fab is an expensive affair, which is why I believe that the government must look at it from a 10-15 year timeframe, so that we know that all the investments that we are doing on the policy side are really giving us the returns that we’re looking at,” suggests Chhabra.

Additionally, providing single-window clearances for investments is another important step to encourage private players to show interest and look at this opportunity in a positive way. This, coupled with substantial investment from industry players, would result in a joint effort by both parties involved, which is necessary to build the ecosystem in the country.
To further tackle this issue, Chhabra suggests that technology transfer could be another way to fuel growth in the sector, similar to how the automotive industry in the country grew, which was primarily through collaboration with foreign OEMs. He says, “Collaborations for technology transfer are really a foot in the door because, if we can get partners, I think that would take us a lot of steps forward.”

Local infrastructure

Interestingly, while many are still fazed by the lack of a component ecosystem to build IoT devices, most tend to forget one crucial aspect—cloud infrastructure. Given the amount of dependency domestic IoT players and global companies operating in the country have on AWS, Google Cloud, Microsoft Azure and its likes, especially, building reliable local cloud infrastructure is one of the cornerstones to make India reliable in terms of its IoT needs.

In fact, the indispensability of these giant cloud providers leaves very little space for domestic players who are providing cloud infrastructure, to which Chhabra points out, “If you really look at it, then their (domestic players’) penetration would be less than 2% in the market because of the 98% being taken away by these global players.”

A large part of this is because of the service-level agreements (SLAs) provided by global players, which are more competitive than the ones provided by the domestic. However, the latter argue that the demand for their services is much less, making it difficult for them to invest in SLAs to provide as many facilities as those offered by Google or Amazon.

Global giants have marked territories with their products that promise more reliability and have made themselves an inseparable part of the ecosystem, which is why it is obvious for a lot of companies working in the IoT space who choose to lean towards them.

While all of this seems to work well, data localisation still stands to be a significant challenge in using the services of global cloud providers. At this stage, data localisation is seen with respect to financial services only, though IoT as well is very reliant on it. For example, there is potential of a serious privacy breach when someone uses a device made in China, which is where all their data goes and is stored. Hence, data localisation particularly becomes THE most important thing to be addressed, especially when considering a local cloud infrastructure.

The only way to break this loop, as per Chhabra, is to make domestic cloud infrastructure come close to the reliability and accessibility of the global cloud, through government policies that promote the growth and use of indigenous cloud infrastructure and create a level playing field for them. He adds, “If we (as a country) can really create that demand then I’m sure that these companies would really come in and come up with better SLAs. This starts with businesses supporting and hiring local cloud infrastructure players.”

Missing Pieces

Coming to another crucial part of an IoT product, connectivity modules that are made in India are yet to garner mass usage in the country, even from domestic IoT players. The biggest challenge that we face is that countries around the globe, particularly in China, have reached economies of scale which we, unfortunately, haven’t. The good part is that we can start with manufacturing connectivity modules in India, which would further be helped if businesses using these modules begin to use only India-made modules.

Again, rationalising custom duty is another great move that the government can make to encourage local businesses to opt for locally-made products. If the companies buying these modules give an assurance that they would buy locally then, obviously, we do not have to look for imports outside India. Chhabra adds, “From another standpoint, there is a need to ramp up investments on test facilities for RF, etc, so that products can be created which are also FDC approved, suggesting we can look for the export market for these as well.”

Especially with the advent of 5G in the commercial broadband space right now, creating compatible products is needed. However, when experimenting with such a new-age technology, overcoming development hindrances to ensure that the technical aspects are right to make the product succeed is crucial. For this, the presence of sufficient testing facilities, particularly for startups and SMEs, is necessary.

The road to make India self-reliant is a huge opportunity and a challenge at the same time. Building a local ecosystem for IoT players to grow and scale up is definitely important, but also the requirement of domestic players to support this growth goes hand in hand. There is a need to add value to each product that is created, which can only be achieved when new and existing companies make a conscious effort to find the missing pieces and solve the puzzle. If this is kept as the supreme aim, India would be self-reliant in no time.

The article is based on presentations ‘How India is Going to Make Itself Self-Reliant wrt Growing IoT Demand?’ by Arpit Chhabra and ‘Making IoT Start Ups Successful’ by Sanjeev Keskar made during Tech World Congress 2020. It has been prepared by Siddha Dhar, a business journalist at EFY.


ARPIT CHHABRA is CEO and Co-founder of IoTfy

SANJEEV KESKAR is Founder and CEO of Arvind Consultancy



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