Technological obsolescence coupled with hubris can be a deadly combination. It happened to the Finnish feature phone giant, Nokia, more than a decade ago. Now it is happening to the semiconductor giant, Intel. To be sure, it has happened earlier too, in industries which are not esoteric. To wit, Colgate, once the byname for toothpaste in India, lost out to competition much of its market share with competitors coming up with dental products matching Colgate’s quality at a much cheaper price.
The catalogue of accusations against Nokia includes pervasive and obdurate bureaucracy, hubris and failure to read the writing on the wall — the importance of aspirational lifestyle products like smartphones of the iPhone pedigree. The Chinese may be accused of copying and showing contempt for intellectual property rights but they are never found wanting in converting products for classes to products for the masses. Elon Musk, the current promoter of Tesla, is fearing Chinese electric vehicles stealing his thunder. The threat is real. The story of Japanese cars humbling Detroit with their cheaper substitutes without compromising on vital parameters is too real to be shrugged off. The Chinese are exploiting their lithium resources to the hilt to produce more capacious, perhaps occupying lesser car belly space, to produce cheaper and longer lasting batteries. In fact, OnePlus has already proved substantially that it is the poor man’s iPhone.
Back to Intel because this article is less about reverse-engineering or use of brute-force software to replicate a better and cheaper product but about technology and products getting dated or swept away by obsolescence. Intel ruled the chip market for laptops till recently with the Intel Inside logo making it preen with pride. But the advent of artificial intelligence (AI) seems to have fluttered its dovecotes so much so that it has had the mortification of having to consider the friendly takeover offer from a relative Johnny-come-lately pure play technology player without any manufacturing footprints — Qualcomm, which has wormed into the heart of Samsung cell phones by getting chips designed for its handsets. Interwoven into the Intel debate is AI making inroads not only into the PC and laptop versions of computing and browsing but more importantly into the ubiquitous hand sets as well. That is where Qualcomm figures.
To be sure, the company is making amends by making use of CHIPS and Science Act funding to create more micro-chip manufacturing capabilities in Arizona and subsidiarising its foundry division. But it is up against time and competition. In the 1990s, Intel was instrumental in personal computer boom with its x86 central processing units (CPU) ousting competitors such as AMD. Since it remained fixated on PCs, Intel shut its eyes on the immense potential in the mobile chip growth in the 2000s, the mistake it is ruing now. Its then CEO, Paul Ottelini, in his interview to The Atlantic in 2013 rued Intel passing up a deal with Apple to design and manufacture chips for iPhone misreading the immense potential for cell phones both by taking an exaggerated view of costs and a pessimistic view of the size of the cell phone market. Again, it spurned the opportunity to invest in OpenAI in order to reduce its (OpenAI’s) reliance on Nvidia chips which is now arguably the market leader. Intel again thought the time for AI hasn’t come yet when it spurned OpenAI partnership.
The long and short of the Intel saga is it has remained content with CPU or central processing unit when the world is inexorably moving towards GPU or graphics processing unit, a vital ingredient for AI which is making many techies shake in their boots. AI’s looming presence in months and years to come can threaten the traditional models of computing, surging and browsing.
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What does the Intel saga portend for India? Well, India has been importing semiconductors or chips all these years. The realisation that chips dominate all walks of our lives has belatedly dawned on our policy wonks and the government. AI controlled refrigerators or ACs or TVs is no longer the stuff of fiction on movies. Against this background, the government has moved in the direction of import-substitution with Vedanta among others showing interest in setting up manufacturing facilities in Gujarat. But we are starting when there is a tremendous upheaval in the semiconductor industry with obsolescence shaking up former giants. India has to rethink what it is going to manufacture. Chips for personal computers and laptops (CPU) alone will not do. It has to be GPU as well, as the faster graphics processing units are going to be vital component of AI aided handsets. In other words, our new semiconductor units have to be state of the art and futuristic. That is the challenge that will test and perhaps sober down our newfound enthusiasm for creating and nurturing semiconductor companies.
India liberalised rather late, only in the early 1990s. Till then we were content with shoddy products with foreign collaborators dumping their inferior and dated technology on the unsuspecting nation. Thus, we had scooters without indicators with drivers waving their hand precariously while negotiating a bend or turn oblivious of the lurking possibility of endangering their own lives as well as those of their family riding piggyback. We should not let that happen again. We must invite collaborators who bring state-of-the-art semiconductor manufacturing technology. Otherwise, we will be stuck with shoddy products and technology and become dependent on imports thus locking up investments wastefully.
S Murlidharan is a freelance columnist and writes on economics, business, legal and taxation issues
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