But a shift seems to be underway, with different nations in Asia making an attempt to take China’s crown.

India is one in every of these contenders. New Delhi has sought to woo foreign tech companies and has been more and more profitable, with giants like Apple increasing their presence in the country.

India is seeking to enhance areas similar to high-tech electronics and semiconductor manufacturing, in addition to assist its burgeoning but challenged startup scene.

At the identical time, international companies wish to diversify away from China amid rising tensions between Washington and Beijing. Tough Covid-19 restrictions enacted by the Chinese authorities, which disrupted operations for companies like Apple, highlighted the necessity for corporations to cut back publicity to the nation.

India may stand to profit. What was as soon as a market that international companies perceived as having an excessive amount of pink tape and too many enterprise hurdles is now changing into a viable various to China. But it should take plenty of effort for India to wrest China’s tech title.

In the most recent episode of CNBC Tech’s “Beyond the Valley” podcast — which you’ll take heed to above — Tom Chitty and I talk about whether or not India can problem China as Asia’s tech powerhouse, and what the nation’s benefits and drawbacks are.

If you’ve any ideas on this or earlier episodes, please e mail us on beyondthevalley@cnbc.com.

You can subscribe to “Beyond the Valley” by clicking the hyperlinks under to your chosen platform:

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Here is a transcript of the episode of “Beyond the Valley” launched on Apr. 3, 2024. It has been edited for readability.

Tom Chitty: For years China has been Asia’s tech powerhouse the place the world’s electronics and a number of the greatest corporations on the planet are situated. But as China’s economic system continues to battle and commerce tensions between Washington and Beijing present no indicators of easing, many international tech companies are trying intently at India. The nation is ready to develop into the world’s third-largest economic system by 2030. And a part of that plan is making a play to herald excessive tech manufacturing to its shores, from Apple’s iPhones to semiconductors, because it units itself as much as problem China as the important thing tech hub in Asia. How’s your week been?

Arjun Kharpal: It’s been nice Tom. Had a pleasant lengthy weekend. It’s an extended weekend right here within the U.Ok. So that was good. Did some gardening. I wish to cook dinner. Did this?

Tom Chitty: Yes I did since you sliced off your finger.

Arjun Kharpal: I did slice off my finger.

Tom Chitty: Let’s simply make clear … a little bit of it.

Arjun Kharpal: It’s rising again. I’m simply taking a look at it now and it is rising again, which is nice. So I’ve simply planted some herbs. Got chives in there, oregano.

Tom Chitty: Is this the time of yr to plant?

Arjun Kharpal: This is the time. So they’re indoors proper now. They bought to enter little kind of child herbs. And then they go outdoors.

Tom Chitty: I imply, how do you discover the time, Arjun? You are a miracle.

Arjun Kharpal: My granddad is nice gardener. So I kind of went spherical his and I stated are you able to assist me plant these? And he bought all of the compost out. Anyways, they’re good child herbs, most likely in about three to 4 weeks. And then I’ll put them within the backyard. So by the summer season, when I’m , actually cooking it up on the barbecue and no matter else happening. I’m making an attempt to develop lemongrass, clearly utilized in plenty of Thai dishes. I do not know if we bought the local weather. But we’ll see.

Tom Chitty: You’ll most likely want a greenhouse for that.

Arjun Kharpal: Don’t have that. But we hope for a pleasant heat summer season.

Tom Chitty: If any of our listeners did not know, Arjun is a giant barbecuer.

Arjun Kharpal: Love barbecue.

Tom Chitty: Are you a coal man or a fuel?

Arjun Kharpal: I’m a coal man. Yeah. It’s simply the flavour. But I’m gonna get into smoking. Not cigarettes, or vapes or something like that. But the smoking of meats and different meals. So I’ll attempt that subsequent. That’s my subsequent large venture. We’ll see. We’ll see.

Tom Chitty: We’re into spring. This is all we’ll discuss now for the following three 4 months.

Arjun Kharpal: Barbecue and herbs

Tom Chitty: Before we get into our good story, we have got to clearly hear Arjun’s stat of the week. I’m on a little bit of a run so let’s have a look at how we do that week.

Arjun Kharpal: Okay, this one is an incredibly low quantity. Usually it is like billions, trillions. 92, simply 92. 92 individuals. I believe that is correct. 

Tom Chitty: That must be the tagline for this podcast. I believe that is correct. Just to remind our listeners that when you’ve got any questions on what we have mentioned this week, or previous episodes, then e mail beyondthevalley@cnbc.com. But again to our primary story. India has made a giant tech push lately, Arjun, what’s been happening? 

Arjun Kharpal: It’s been an attention-grabbing, two, three years for India, I believe when it comes to making an attempt to get some momentum into its tech sector. And there appears to be kind of a shift that occurred about three years in the past, maybe, the place India was saying, nicely, we need to be a expertise powerhouse. And the groundwork was being laid for this, , few years prior when it comes to making an attempt to make regulation higher these form of various things. But successfully, India is now gunning to be a expertise powerhouse in a number of fronts. And simply to attempt to break that down. You talked about firstly, China has sometimes been the kind of large expertise powerhouse of Asia. Now China has been very sturdy on manufacturing, electronics manufacturing, many of the world’s electronics are manufactured in China, but additionally because of its kind of prowess in expertise, it has invested in areas like semiconductors, like monetary expertise, , ecommerce, so many EVs, so many alternative areas in China and it appears India is taking a look at these areas now as ways in which it desires to kind of catch up and be identified to be sturdy on this space and a type of is semiconductors. India is on a giant semiconductor push, we will dig a bit extra into that. Another one is excessive tech manufacturing, once more, one thing that China has sometimes been sturdy into an India’s making an attempt to place itself in its place, plus, it does have a fairly vibrant but challenged for the time being startup scene as nicely. So there’s many areas now India’s making an attempt to push, electrical autos once more, one other space that it is that it is taking a look at fairly intently. So proper now, it is a large virtually advertising push on the world stage from India to say, hey, I do know China has kind of been dominant, however China has had its points. Why do not you have a look at India now? And that’s the message actually from India at this level to the worldwide tech neighborhood.

Tom Chitty: India’s Prime Minister, Narendra Modi has actually pushed for this, not simply in the previous few years, however that is kind of a plan that is been cooking for some time. Sorry, to carry it again to meals, along with his Made In India initiative to attract that international funding into the nation. So are we now in a spot the place it is kind of the proper timing due to what else is going on in China, with its struggles, that truly this is not simply them simply taking benefit that it has been, , this has been within the works for some time?

 Arjun Kharpal: I believe that is a good way to place it Tom, as a result of Modi, and below his management, since he turned prime minister has been fairly clear that he desires much more manufacturing to be in India. The Made In India program, as you stated, has been a key a part of that to attempt to onshore extra manufacturing of expertise, but additionally different issues too. But China has nonetheless for a few years, dominated. And I believe, what modified the sport fairly considerably, I’d wish to say kind of started in, say, 2018, so kind of roughly three, 4 years after Modi turned prime minister, Trump turned president of the U.S. And what that sparked actually was an elevated stress with China, not solely on the commerce warfare entrance, however then additionally on this expertise battle between the 2 nations and geopolitics began to actually forged a shadow over the tech sector globally. And I believe a lot of them started to have a look at China and suppose, I ponder what our future seems to be like in China. So that was one half. Then you had export restrictions, and numerous different issues occur, after which COVID hit. And I believe COVID, particularly, uncovered many tech corporations reliance on China. Apple was a key instance of that. During COVID, the most important iPhone manufacturing unit on this planet run by Foxconn, the Taiwanese agency, , had a number of incidents the place kind of manufacturing was disrupted due to the COVID restrictions in China. And there have been additionally unrest as nicely inside the manufacturing unit. So there have been numerous issues that occurred, which I believe underscored corporations like Apple’s reliance on China. And I believe, what occurred with COVID is that basically accelerated corporations trying elsewhere, at the place can we manufacture? Where may we have the ability to arrange store? And the place is there additionally a viewers for our merchandise? And India matches all of these payments. So concurrent with that, India was doing issues like wooing these American corporations, inviting them over, inviting them to arrange factories, arrange store arrange workplaces in India, on the similar time once they have been precisely in search of a diversification play. And so all of these items got here collectively. And I believe we’re right here now, the place there’s been a number of large actions. So one, Apple now manufactures its newest iPhones in India, not all of them, plenty of them nonetheless out of China. Micron, one of many world’s greatest reminiscence chip makers, has bought approval to arrange a manufacturing unit there. I’m speaking semiconductors right here as nicely.

Tom Chitty: Sorry, simply to make clear Micron is an American firm?

Arjun Kharpal: Tata Electronics may also associate with Taiwan’s Powerchip Semiconductor Manufacturing Corp to once more arrange a semiconductor fabrication plant. So you are now seeing international corporations start to arrange store there. And all of these efforts, the timing, come to fruition. And that is actually what’s taking place in India, kind of excessive tech sector once we’re speaking about issues like semiconductors, like electronics manufacturing at this level, versus, say, China. And it is partly India making the enterprise atmosphere barely higher. It’s partly these U.S. corporations and international corporations extra broadly in search of diversification away from China. And it is broadly additionally concerning the concern for a lot of international corporations about relying an excessive amount of on China given the geopolitics and given what they noticed in COVID.

Tom Chitty: I talked firstly about the truth that there’s this abundance of labor in India. And the nation did develop into the world’s largest inhabitants solely lately. What different causes are there for why the nation is so enticing now?

Arjun Kharpal: I believe there’s a number of causes. One, as you stated, the inhabitants measurement, proper? It’s bought a big home market of customers, identical to China had, or has even. So, , in the event you’re an electronics producer, or organising store in India, , not solely are you able to manufacture merchandise there, however you are saying, I may promote these right here, too. There’s an enormous inhabitants. And it is a younger inhabitants, it is a tech savvy, tech ahead nation at this level, as nicely. So that is partly one of many causes. The different one is there’s an enormous quantity of expert labor there. Now, that there actually must be extra. I do not suppose at this level India can maintain an enormous inflow of corporations desirous to arrange store after which having to search out expert labor there. I do not suppose there’s that a lot. But actually, it is a level the place there may be plenty of expert labor, there’s engineers, that are key for electronics, key for semiconductors and different areas. They’re English talking, as nicely. So in the event you’re a international firm, in the event you’re a U.S. firm and need to arrange store there, you do not have to fret concerning the language boundaries, as nicely. So that is one other large purpose. And you might be seeing extra of those international direct funding flows, as a result of India has tried to make it just a little bit simpler for international corporations to arrange store. India sometimes had a repute of being stuffed with pink tape, very bureaucratic, a spot that was very tough to do enterprise. Now, I’m not saying that is utterly gone in any respect. But there is definitely been strikes to attempt to scale back that view of India at this level.

Tom Chitty: And on the flipside, China has is now seen as in relation to regulation, and conducting enterprise in that nation just a little bit more difficult than possibly it was in recent times.

Arjun Kharpal: I used to be on our Squawk Box Europe present final week speaking about this. And, , Karen Tso, the anchor requested, what about international corporations now, China’s now after their economic system is below strain, and so forth, making an attempt to roll out the pink carpet to international companies. And, , will international companies make investments once more in China? And I stated, the issue China has had now could be they’ve misplaced the belief and damaged the belief of so many international corporations. And what I imply by that’s, over the previous few years, the COVID restrictions have been so intense, and infrequently carried out in a method that did not have plenty of certainty and planning, that many international companies did not know kind of easy methods to react, and it affected their manufacturing, it affected their their operations. But additionally, there’s been plenty of regulation over the previous few years in China, that always has come out of nowhere. It’s been introduced in a short time, carried out very, in a short time. And international corporations not likely understanding easy methods to react to that as nicely. Investors have misplaced belief within the Chinese markets, and the Chinese corporations due to the quantity of regulation and this query marks of over whether or not they’ll develop. And in fact, China is having its personal financial issues as nicely. And that is impacted plenty of corporations willingness to speculate it. And then, , add on the geopolitics and every thing else we spoken about and it seems to be like a really tough state of affairs. On the flip aspect, India is basically rolling out its pink carpet, as nicely to plenty of these international companies at a time, as we stated, they’re in search of alternate options. And in order that’s been a plus for them at a time when China is dealing with a ton of challenges. And I believe that is one of many greatest points proper now for China. And what’s actually benefited India lots. 

Tom Chitty: And India has now seen, a minimum of amongst a survey of 100 funds, the preferred rising market with buyers. And conversely, China, nonetheless enticing, however it’s in second place, alongside Brazil. And so the danger of dropping that capital goes to be fairly vital to the Chinese economic system.

Arjun Kharpal: China is liable to dropping that capital. I believe the flip aspect is once more, the market cannot be ignored. China, once more, enormous inhabitants, 1.4 billion individuals, customers are rising center class, and so forth. All these structural issues that attracted these corporations within the first place. Plus, some extent to make you may’t simply decouple, , Apple cannot get up tomorrow, Tim Cook, CEO of Apple cannot get up tomorrow and say, what? Screw it. I’m shifting all my manufacturing out of China. It’s inconceivable. It’s inconceivable to do. But I believe the important thing level right here goes ahead, that degree of funding we have seen in China from plenty of international corporations is unlikely to be met nowadays once they’re taking a look at not solely India, however really different elements of Asia as nicely. Vietnam, Indonesia, Thailand, these locations have attracted some tech manufacturing as nicely. And so, , there may be extra competitors versus China now. And that is a problem. I’d say, although, in addition to India’s accomplished extra lately, there was this actually fascinating interview that is come out final week, from Raghuram Rajan. He’s the individual I’ve spoken to earlier than, he was once the central banker of the Reserve Bank of India. And he got here out and he stated, the best mistake India could make is to consider the hype about their very own development and financial story. We’ve bought many extra years of onerous work to do to make sure the hype is actual. Believing the hype is one thing politicians need you to consider as a result of they need you to consider that we’ve got arrived. But he stated it will be a severe mistake for India to succumb to that perception. He stated, a number of the greatest challenges that India should grapple with for the time being is enhancing the training and expertise of the workforce. And with out fixing that India will battle to reap the advantages of its younger inhabitants. So what I used to be saying earlier is the expert employees aspect of the equation, the tech corporations, significantly these within the engineering aspect of issues, semiconductors, excessive tech manufacturing, they want expert employees. Now, if all of those corporations arrange store, the place are they getting these employees from? Is my query. I do not suppose India has the provision but of that. So the joy actually is across the younger inhabitants, about our workforce, possibly within the larger cities, for certain, that’s educated, that’s English talking, and so forth. But once more, there’s nonetheless plenty of work to do within the Indian kind of tech expertise aspect of issues.

Tom Chitty: That’s one of many challenges, although, is not it for a democracy, proper? Modi’s working on a restricted time period. And, , his objectives, and his targets will probably be targeted in on when that time period ends, and but investing cash, time, effort into the younger era with training that can solely bear fruit over a course of a number of years. And that is the problem you face in opposition to China, which as an authoritarian regime can look forward with that long run objective, and make investments, understanding that it is the CCP will nonetheless be round come 20 years when , the fruits of those who an funding will present.

Arjun Kharpal: Yeah, it is a large problem. And it is one which comes with financial development, that should proceed, in order that the inhabitants can afford issues like training, and so forth. And so there’s lots, there’s plenty of structural issues that India must do for certain, in an effort to be an actual long run viable various and a powerhouse of tech in Asia. The groundwork is beginning to be laid and also you’re beginning to see preliminary kind of inexperienced shoots with a number of the investments we have spoken about. But I do not suppose it is all tremendous constructive proper now. I believe there’s nonetheless plenty of work. I believe, as Raghuram Rajan alluded to, that must be accomplished structurally, for India’s economic system, for India’s workforce, training and skilling, so as then, , for there to be a inhabitants that may assist this development of tech. And that is not there but.

Tom Chitty: I needed to speak just a little bit extra about semiconductors for a second, as we all know, they’re most likely an important expertise on this planet. They are there in just about every thing we use daily, is that one thing that India may feasibly develop into a pacesetter in when it comes to manufacturing?

Arjun Kharpal: It will probably be a tricky ask, I believe, for India to be a producing chief. I believe proper now because it stands, the manufacturing leading edge manufacturing remains to be Taiwan, nonetheless South Korea, with the likes of TSMC, with the likes of Samsung, I believe India has some strengths in sure areas. One of these is round chip design, and packaging. These are kind of elements of the provision chain that requires plenty of labor and a talented workforce once more, so these are areas of suppose the place they might be sturdy. One factor you will notice is Indian corporations strike partnerships with say Taiwanese companies to arrange store for manufacturing. But I doubt there will be manufacturing, probably the most leading edge nodes. There is likely to be kind of older generations that may go into issues like autos, or home equipment or, or a few of these different areas as nicely. But sure elements of the provision chain, they may do very, very nicely in so I think you are going to see much more on the semiconductor entrance. The authorities has unlocked billions of {dollars} to attempt to assist bringing in semiconductor corporations to their shores. So that is going to be, I believe, a giant a part of the technique for India on the semi entrance going ahead. 

Tom Chitty: We clearly spent many of the episode speaking about, , exterior funding, international funding coming into the nation. But , India itself has a really thriving startup sector. How does that match into all of this?

Arjun Kharpal: Yes, thriving, and now challenged. It’s not a selected India downside, however I believe it is a kind of broader downside. Last yr, funding fell to about $9.6 billion VC funding into startups. That was down from 26 billion in 2022. That’s based on a report from Bain. Part of that’s the international macro headwinds. I believe VCs have tightened their belts, as a result of the tech sector has been below strain with greater rates of interest, and so forth. But they’ve additionally had some particular person tales, which, , what we’ll go into in a later episode. We have had particular person tales of corporations simply spending an excessive amount of too quick, tales we have seen elsewhere within the U.S. and numerous different markets as nicely, that has led to difficulties. And there’s nonetheless hurdles, I believe, to international capital influx into that. But that is not to remove from the very fact that there’s a there’s a vibrant scene there. And plenty of that’s in Bangalore, someplace you’ve got been? You went there a number of years in the past, proper? 

Tom Chitty: Yeah, I did. Yeah, we have been doing a journey collection. We went, we went via Goa, Bangalore, Kolkata, Delhi and Mumbai, loopy, unimaginable place vibrant, chaotic at instances. But , that is the tapestry of what’s a magical nation. But I discovered Bangalore to be really barely completely different. It was just a little bit extra calmer. A bit bit, possibly too cool for college just a little bit. It was just a little bit extra European. There was European influences there. I believe plenty of the startup scene, , had been to Europe, the U.S. educated there and introduced again a few of these influences into Bangalore. I would not most likely say it was my favourite metropolis, simply because I like for chaos. I imply, individuals have stated, oh, it is India’s Silicon Valley, which I believe is doing a disservice, I believe it is really probably far more attention-grabbing, , when it comes to its influences from all world wide, and it is clearly a disgrace to , that they are clearly a sufferer to what we have seen throughout all startups with the dearth of funding and, , a struggling world economic system. But I think about that they are additionally a part of Modi’s plans, or a minimum of I hope they’re a part of Modi’s plans inside this entire changing into a tech hub or Asia’s de facto tech hub. Do you that can ever occur? And if it does occur, when do you suppose that may be?

Arjun Kharpal: I believe India’s had an ideal advertising push, let’s put it that method over the previous couple of years. In explicit Modi, he is a daring character. And he likes to be seen on the world stage. And he is clearly been in a position to exert some affect to ensure that individuals like Apple CEO, Tim Cook, and the CEO of U.S. chip corporations are coming over, manufacturing, and so forth. And he is clearly tried to make India appear protected for enterprise. Because as we have stated, plenty of these companies are scarred from the geopolitics between U.S. and China. To develop into a real powerhouse, when it comes to a tech hub of Asia takes years to construct up. And I believe India is within the very early phases, to place it fairly bluntly, of making an attempt to do this. There’s political will, which normally helps causes. There’s a number of the structural benefits we have spoken about. And in fact, a number of the disadvantages we have spoken about as nicely. I believe India will probably be a giant participant in tech, doubtless, within the coming years. I believe it should take a number of the share away from China in sure areas. And I believe that it’s going to thrive in actually quite a lot of areas as nicely. When a number of the greatest corporations like Apple say, , we need to make 25% of our iPhones in India, it is a large sign to others within the electronics neighborhood, within the tech neighborhood, that you’ve one of many largest corporations on this planet, one of many greatest electronics producers or designers on this planet, saying that they need to ramp up manufacturing that a lot into India. That’s an indication that others may observe? I believe the large danger for India is that if the political scenario adjustments anyway, India’s political scenario, I imply, like politics everywhere in the world may be risky. You know, is there any change in in geopolitics between India and nations just like the U.S. and others, which implies U.S. corporations are just a little bit extra standoffish about investing in there? There’s so many causes and dangers to the India story. Do a number of the guarantees and the hype not play out?

Tom Chitty: India have gotten an election this yr as nicely, which goes to be attention-grabbing to see what occurs there. And I additionally imagined that the connection between China and India, which has by no means been nice, may probably get just a little bit extra frosty.

Arjun Kharpal: Yeah, it is fairly dangerous for the time being. I imply, on the tech entrance, India’s banned a ton of apps from China. You know, India has aligned itself barely extra to the nations which can be at the moment a bit extra anti-China, let’s consider? That geopolitics with China may get much more frosty, which, to some extent, advantages. India, if it is making an attempt to get in additional international companies from locations just like the U.S., for instance. So there’s lots at stake this yr. As you stated it is an election yr, large, large yr for India. And , we’ll see who the brand new authorities is and what they will prioritize as nicely, when it comes to the tech entrance, however it feels like every authorities that comes into India now has to have tech on the forefront of their thoughts, given I believe how essential expertise may be to a rustic’s economic system, I believe going ahead and all the large adjustments that we’re seeing when it comes to AI, semiconductors, and so forth, and so forth, as nicely.

Tom Chitty: Brilliant stuff. But earlier than we end, we’ve got in fact, bought to do stat of the week.

Arjun Kharpal: 92 individuals, Tom.

Tom Chitty: The quantity of individuals it takes to fabricate one microchip.

Arjun Kharpal: Oh, wow, you might be thus far off. It’s bought nothing to do with chips. All it was I noticed this actually attention-grabbing story on cnbc.com. It was one of many high learn tales. And it is the variety of billionaires in Mumbai. And it is the primary time Mumbai has taken the highest spot in Asia for the variety of billionaires within the metropolis. It’s overtaken Beijing now, for the primary time, which has 91 billionaires. It’s simply behind London on 97 and simply behind New York on 119. I do not know does that talk to India’s development story in a roundabout way?

Tom Chitty: Well, the expansion of the pockets.

Arjun Kharpal: The pockets of the ultra-rich. Yeah, however I simply thought was a really attention-grabbing stat. China as a rustic nonetheless has probably the most variety of billionaires, 814, forward of the U.S. on 800 and a distant third, India, 271. The U.Ok. 146. Germany 140.

Tom Chitty: Just what our listeners need to hear about is the extremely rich, getting wealthier.

Arjun Kharpal: Are you not on that checklist? You should be shut.

Tom Chitty: I’m getting there.

Arjun Kharpal: All the BTV episodes.

Tom Chitty: I imply, all these these episodes, simply cash, simply pouring straight into my pocket. Have you’ve you not seen any of that motion?

Arjun Kharpal: No. All I’ve bought is a mug with the branding on it. That was my reward. 

Tom Chitty: Okay, that is it for this episode. Before we go, please observe and subscribe to the present. And you may even charge us. Thank you, Arjun.

Arjun Kharpal: Thank you, Tom.

Tom Chitty: We’ll be again subsequent week for an additional episode of Beyond the Valley.