Nikhil KamathEp #23 | WTF are Consumer Electronics? | Nikhil ft. Carl Pei, Rahul Sharma & Amit Khatri
EVERY SPOKEN WORD
150 min read · 30,010 words- 0:00 – 1:12
Intro
- NKNikhil Kamath
today is for any young Indian boy or girl under the age of twenty-five, wants to start a consumer electronic brand. [upbeat music] Start? Okay, ready? All right. Hi, guys. Thank you for coming home and doing this. I think Carl had to travel from farther, further away.
- SPSpeaker
Mm-hmm.
- NKNikhil Kamath
Amit and Rahul live closer in Delhi. So maybe we start by speaking about ourself, giving my audience an intro of who we are, how we got to be where we are. Rahul is already a friend of mine, so I know a lot about him.
- SPSpeaker
Mm-hmm.
- NKNikhil Kamath
But
- 1:12 – 5:05
How Apple sparked Carl’s love for tech
- NKNikhil Kamath
maybe we start with Carl.
- CPCarl Pei
Sure. Um, happy to be here. It took a while for us to schedule it back and forth, but, um, we're finally here. Um, so, so I'm Carl. Um, I'm one of the co-founders of a company called Nothing. Uh, but ever since I can remember, I was always a tech fan. Um, I grew up in Stockholm, in Sweden. I remember my parents got me the first iPod, and, uh, I was only, like, 12 at the time, and the first-generation iPod was very complicated because I don't know if you guys remember, it had the FireWire connection.
- SPSpeaker
Right.
- CPCarl Pei
I had a PC.
- SPSpeaker
Yeah.
- CPCarl Pei
It didn't have the FireWire, uh, connection, so I had to buy a... First, I got the iPod. I didn't know-
- SPSpeaker
Mm
- CPCarl Pei
... you couldn't connect it to the-
- SPSpeaker
Right
- CPCarl Pei
... to the PC. Then I had to buy a PCI card for FireWire-
- SPSpeaker
Mm
- CPCarl Pei
... install that to even be able to connect the iPod. And back then there was no iTunes, so it was RealPlayer-
- SPSpeaker
Mm
- CPCarl Pei
... to, to manage the music. But anyway, that product got me really hooked on technology. The scroll wheel was really cool and, uh, managing the music library, you know, fixing all the ID3 tags for each song, uh, getting the album arts perfect.
- SPSpeaker
Mm.
- CPCarl Pei
And, uh, a couple of years later, I was probably the... So I, I think I was the first to get the iPod in my entire school. Um, so, so I was a, a cool kid among the nerds-
- SPSpeaker
Yeah
- CPCarl Pei
... in the beginning.
- NKNikhil Kamath
Where was school, Carl?
- CPCarl Pei
That was in Stockholm.
- NKNikhil Kamath
Stockholm.
- CPCarl Pei
Yeah.
- NKNikhil Kamath
What year are we talking about?
- CPCarl Pei
iPod. When was iPod? Uh, 2001?
- NKNikhil Kamath
Yeah, you're 36 today, right?
- CPCarl Pei
Yeah.
- NKNikhil Kamath
I mean-
- CPCarl Pei
Thirty-five, turning 36. So when I was 12, I got the iPod. Really excited about that product. Um, then I got the first iPhone through a friend in the US because the iPhone was only, uh, exclusive with AT&T.
- SPSpeaker
Mm.
- CPCarl Pei
Um, so I had a friend buy it for me, and then we had to pay a $450 cancellation fee on the contract, then got it shipped, and then jailbroke it, and installed my own SIM card. So I was the first among all my friends to get the iPhone. But I think those two products were super formative, uh, for me. I guess the third thing that happened was, um, then I got the iPad. I forgot which year, but the first year the iPad came out. And I don't know if you guys remember, it used to have a skeuomorphic UI. So basically, the UI tried to mimic how things looked like in real life, and when you swipe, swipe from the, uh, bottom, there was a control panel, and it was, like, metallic. So you had, like, a volume knob that was brushed metal. But when you tilted the iPad, the, the light source of the, the, the graphic also changed. So I'm like, "Oh, my God! Like, if Apple thinks about every little detail like this, I can trust them on, like, they've figured everything out." So those three moments made me a big fan of this industry and of Apple.
- 5:05 – 7:28
The reason for Y Combinator’s success
- CPCarl Pei
So then fast-forward to later, so I had the internet. Started making friends online, 'cause I felt like, um, the friends around me, they only saw a very small part of the world, whereas online you can connect with, uh, uh, anybody. So I made a very good friend. Uh, we were chatting on MSN Messenger every single day about how to make money online.
- SPSpeaker
Yeah.
- CPCarl Pei
We were both writing blogs and, uh, making websites and all that stuff. And then, um, he then became the youngest founder to get into Y Combinator, and he's, like, two years younger than me, so I'm-
- SPSpeaker
Wow!
- CPCarl Pei
I was very jealous-
- SPSpeaker
Mm
- CPCarl Pei
... when he got in. Uh, he was probably 17 or something, and so that was also my plan. So after uni, I'm gonna apply for Y Combinator. So it was a different time when the consumer internet was still very, like, booming, with Facebook and all that.
- NKNikhil Kamath
What's really working for Y Combinator? We're trying to start something like that-
- CPCarl Pei
Mm
- NKNikhil Kamath
... called WTF Fund, which is a non-dilutive grant program, where we don't take equity, so not-
- SPSpeaker
... not too much like Y Combinator, but a different version of it. Why have they been so successful?
- CPCarl Pei
I don't know. I haven't thought about it. When I was young, I just wanted to go there because I thought that was the place you had to go if you wanted to become a Silicon Valley founder. Um, they made a lot of- they've been a kingmaker in the industry, I think. I'm sure they have some, uh, unique way of, uh, figuring out who's a good fit in terms of founders, and then they have their brand, and then they, uh, prepare the founders for, like, a, the, the, the subsequent funding rounds in a pretty smart way. Like, even when I'm raising money, sometimes I reference the Y Combinator, uh, docs, like the, the guides for how to raise money. So they, they-
- SPSpeaker
Do you think it's network or access to capital?
- CPCarl Pei
The capital is very little, actually, right?
- SPSpeaker
Half a million.
- CPCarl Pei
Yeah. It was even less before, and they take a lot of stake for that money. Um, but I think it's a branding thing. Like, once you have that brand on your resume, your next round will be a lot easier, and your, your next, next round will be a lot easier. And they do have good content to teach. Maybe that's their, um, user acquisition, right? Having good content-
- SPSpeaker
Mm-hmm
- CPCarl Pei
... to teach young people, uh, why you should start a company, how you should start a company, and then once they're ready, they, they inbound to Y- YC.
- SPSpeaker
Okay,
- 7:28 – 15:05
Carl’s ‘lazy genius’ approach towards his career
- SPSpeaker
and then?
- CPCarl Pei
So I was planning to go to YC, and then, uh, I was playing a lot of games.
- SPSpeaker
Mm-hmm.
- CPCarl Pei
A lot of League of Legends at that time. Uh, so wasn't very-
- SPSpeaker
Games as in, like, video games, or?
- CPCarl Pei
Yeah, like, uh, online-
- SPSpeaker
Online games
- CPCarl Pei
... computer games. Um, so I was a bit lazy, so I didn't write my application, but then I got a phone call from, uh, the CEO of Meizu-
- SPSpeaker
Mm-hmm
- CPCarl Pei
... back then.
- SPSpeaker
Mm-hmm.
- CPCarl Pei
He's like, "Uh, hey, we wanted to become more international. Uh, do you wanna help?" So I had, like, two options: either I have to write my, uh, application for YC, or I can go to China to join Meizu. Uh, I took the path of least resistance, and, uh, didn't finish my university. I moved to Hong Kong in, uh, 2011.
- SPSpeaker
For Meizu?
- CPCarl Pei
For Meizu.
- SPSpeaker
Just for the minute, Meizu was the, the, the Apple of China at that time. They were the first one to come up with a phone.
- CPCarl Pei
Yeah?
- SPSpeaker
Yeah.
- CPCarl Pei
The first Chinese smartphone.
- SPSpeaker
Yes.
- CPCarl Pei
Um...
- SPSpeaker
Was Meizu.
- CPCarl Pei
They made really great MP3 players before.
- SPSpeaker
Yeah. Mm-hmm.
- CPCarl Pei
That's when I got to know the company. Um, and then, yeah, to be a part of the beginning of something interesting, that's why I moved, and also out of, uh, laziness-
- SPSpeaker
Mm-hmm
- CPCarl Pei
... to not have to write the thesis for university and the application for YC. And the reason why he reached out to me was because after I discovered their products in 2006, I made an online fan community about that company, and it got, uh, quite big. We got to, like, 70,000, uh, users, members. We were updating, like, people on the new firmware updates and, uh, customization and all that stuff, and then I think he saw something in that and, and decided to call.
- SPSpeaker
So the founder of Meizu called you himself?
- CPCarl Pei
The CEO.
- SPSpeaker
Yeah?
- CPCarl Pei
The professional CEO.
- 15:05 – 16:36
How Nothing differentiated itself
- CPCarl Pei
thing. We-- It's a very, uh, mature industry-
- NKNikhil Kamath
Mm
- CPCarl Pei
... and it's very hard to compete because everybody is at very high scale, so they have a lot of advantages. Um, we're not reinventing the category. It was invented a long time ago by somebody else. So for us, it's all about carving out a small position in the market first. We don't have h- we don't have to have everybody love us. Uh, it's okay if 90% of people don't care about us or hate us, as long as we get a niche group of consumers who really, uh, love us. Um, that works in our industry because it's so big. Maybe it doesn't work for smaller categories. So for us, we chose to differentiate through design because it was the fastest way to differentiate. If we picked, you know, technology, it would take years to play out, a lot of investment, a lot of years. Um, we also didn't want to reinvent the product category. Like, if we have crazy ideas on a new gadget-
- RSRahul Sharma
Mm
- CPCarl Pei
... might spend years on, on trying to build it, and then if we launch it, you only have one chance. If people don't like it, you're, you're screwed. Yeah, so we start with hardware design, then we moved to software design. Uh, now we're investing more and more into the OS itself, into AI. Uh, so I think for us, it's about building, uh, differentiation and moats over time, but in a gradual way. Don't move too fast, because then you might kind of fall off the horse.
- NKNikhil Kamath
So for a company headquartered in Sweden-
- 16:36 – 22:10
US tariff’s impact on China, India & the industry (Note: Since this episode was recorded before recent changes to global trade & tariff policies, some views may not reflect current regulations.)
- CPCarl Pei
Uh, UK.
- NKNikhil Kamath
UK, the trade war will affect you how? Tariffs?
- CPCarl Pei
So now the most direct way is, uh, Trump had new tariffs for, uh, manufacturing from China. So we manufacture the earbuds in China, and, uh, that's like a 20% hit on our, uh-
- RSRahul Sharma
Import
- CPCarl Pei
... business plans for the US market. So now we need to look at alternative, uh, sources of manufacturing, like India, like Vietnam, uh, where it makes the most sense.
- RSRahul Sharma
Yeah. This is, this is the first time... You know, every night, 10:00 PM, I go on cnn.com, see.
- NKNikhil Kamath
Yeah.
- RSRahul Sharma
He must have woken up, what is the new news? [chuckles] And then go to sleep. Yeah.
- NKNikhil Kamath
But it won't affect you as much if you're getting stuff from China and selling in India, right?
- RSRahul Sharma
No, it's not about, it's not about that, getting from... See, because the supply chain right now-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... is, is there in China, and then all the manufacturing now is coming to India.
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
But it's not about China, it's about India also-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... because reciproc- you know, reciprocal tariffs and all those sort of things are-
- NKNikhil Kamath
But I would assume it would hurt you most if you are selling something in the US.
- RSRahul Sharma
Certainly, yes. But it's in-- Now we're talking about the whole industry, you know, per se. So, uh-
- NKNikhil Kamath
Right
- RSRahul Sharma
... you know, it's, it's, if you see the reciprocal tariff, even on mobile phones, for a, it's, you know, in, uh, it's 16.5%.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Right. So if anything coming into India, is there is a duty of 16 and a half. Going to US, as of now, is 0%. So reciprocal means...
- NKNikhil Kamath
At some level, doesn't it sound fair? Like, I'm just-- I have no affinity to America, and I'm the biggest proponent of India, built for India, supporting Indian product. But-... If tomorrow I was selling to country XYZ, and I was selling them something, and they were charging me thirty percent duty on it-
- CPCarl Pei
Mm-hmm.
- NKNikhil Kamath
If I was buying something from them, I would assume the same duty should apply?
- CPCarl Pei
Yeah, I think so.
- NKNikhil Kamath
Like, inherently, it's logical, no?
- RSRahul Sharma
No. Yeah, but I have a different view here. See, it's, it's not binary. It's not zero. It depends how do you want to bring up your country? What are your policies? For example-
- NKNikhil Kamath
Mm.
- RSRahul Sharma
We've been discussing about China a lot. In China, way back, they decided that they're not going to allow the foreign companies. Foreign companies can only come with JVs-
- 22:10 – 24:23
Carl’s philosophical views on life
- NKNikhil Kamath
Carl, can I ask you another question?
- CPCarl Pei
Mm-hmm.
- NKNikhil Kamath
For a kid who moved from China to the US with two PhD parents and a deep desire to make money are young, where does that come from?
- CPCarl Pei
I'm sure there's some, uh, childhood trauma, uh, but I've never explored that path to understand more.
- NKNikhil Kamath
What do you suspect it could be?
- CPCarl Pei
I think just being, uh... not fitting in, the feeling of not fitting in, you know, like-
- NKNikhil Kamath
But you're a young, good-looking guy. Why not fitting in?
- CPCarl Pei
'Cause I grew up in, uh, white societies as a minority.
- NKNikhil Kamath
Racist back then?
- CPCarl Pei
Uh, I think it's not, like, explicitly racist, but it's like, you're, you're just not the same, right? Like, I could tell. I think it's, there's something to do with that. But else-
- NKNikhil Kamath
US more so or Sweden?
- CPCarl Pei
I think, uh, both.
- NKNikhil Kamath
Is that all? Childhood?
- CPCarl Pei
I think childhood trauma is a, is a big part of it, but I haven't, uh, gone to a therapist to unpack all of that. Uh, there's also, um, I think a fear of death, you know? Uh, I remember when I was very young, I even, uh... I was, like, very angry at my parents for giving birth to me, because now I have to die, and that's, like, terrible. "Why did you, why did you do this?" Uh-
- NKNikhil Kamath
This is at what age?
- CPCarl Pei
Eight, I think. So there's, like, a, this fear, and my, my, my best answer is, like, "This is gonna be a journey. Life is a journey." Um, I, I, uh, I got the conclusion from the movie Life of Pi.
- NKNikhil Kamath
Mm-hmm.
- CPCarl Pei
The, the kid is on a boat, meets a lot of animals, but actually it didn't, didn't happen. Just made it up to make the journey more, more pleasant.
- NKNikhil Kamath
Mm-hmm.
- CPCarl Pei
Um, so it's all about the journey, and I think by doing something ambitious, doing something different, the journey will be a lot more fun.
- NKNikhil Kamath
Mm-hmm.
- CPCarl Pei
So that's also a, a driver, I think.
- NKNikhil Kamath
Do you feel like nothing has meaning? Are you nihilistic, stoic in your thinking?
- CPCarl Pei
Uh, I think the journey has meaning, but, uh, I don't think there's much beyond death.
- NKNikhil Kamath
Well, thank you. Rahul, would you like to go next? Tell us about your
- 24:23 – 29:30
Rahul’s journey & the roots of his entrepreneurial spirit
- NKNikhil Kamath
life. Start from the beginning, from Delhi.
- RSRahul Sharma
You know-
- NKNikhil Kamath
I know, but they don't know. [chuckles]
- RSRahul Sharma
... so, uh, yeah, grew up in Delhi. Uh, born in a middle-class family. Father was a schoolteacher, uh, mother was a housewife. Youngest kid in the family. Um, growing up, uh, just wanted to do something. Nobody was doing business in my family because, you know, all... But I s- I don't know how I picked up that, but that I will always do something of my own. This was probably when I was, maybe if I remember, around ten years or twelve years. I just wanted to do something of my own.
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
And I was pretty clear that I will not work for anybody else-
- NKNikhil Kamath
Mm.
- RSRahul Sharma
-despite knowing that there is no capital. So-
- NKNikhil Kamath
Why?
- RSRahul Sharma
No, as a, as a schoolteacher, how much capital do you really have?
- NKNikhil Kamath
No, why will you not work for anyone else?
- RSRahul Sharma
Because I just thought that I want to do something different in life, in terms of something meaningful. I am not saying impact, because at that time I don't, you know, it was not about impact, it was about survival and, and those-
- NKNikhil Kamath
You have said this to me in person, like personally, at different points.
- RSRahul Sharma
Mm.
- NKNikhil Kamath
Even when I've sat with you and had the fund raise dilution conversation, you always said, "We won't raise X because control will go away, or we'll have somebody else we are answerable to." Why did you never want to work for anyone else? And why do you never want to give up control or your position in that ecosystem?
- RSRahul Sharma
Yeah. So I think we'll be, uh, break up in these-
- NKNikhil Kamath
Yeah
- RSRahul Sharma
... two parts. First, not to work for any, because I wanted, as I said, to do something, something different, something big, something meaningful. And I-
- NKNikhil Kamath
See coffee there?
- SPSpeaker
Yes.
- RSRahul Sharma
I remember this conversation with my friends at that time, and-
- NKNikhil Kamath
Mm-hmm
- RSRahul Sharma
... we used to go and play in parks, that I will do something of my own, and, uh, they will ask, also ask the same question. But, uh, I think there was a deep desire in terms of wanted to... Wanted to be known for something.
- NKNikhil Kamath
Why?
- RSRahul Sharma
... "..." [laughing] No, but, so why? Maybe because, you know, when I was growing up, saw, uh, you know, the how people were and how things were going on, and in terms of whatever access, l- l- so because, you know, we were having very limited access to things.
- NKNikhil Kamath
So you're fifty now. Your formative years were nineties? When India was opening up.
- RSRahul Sharma
Yeah. In, in, you know, end of, uh, yeah, let's say, you can say when I started working, it was 2000. Yeah.
- NKNikhil Kamath
Right. What did you see then, which made you want to do these things?
- RSRahul Sharma
So first, you know, when I just told my dad that, "Okay..." He said: "What do you want to do?" I said: "I just want to do something of my own." He said, "What?" I said, "I have no idea. But buy me a computer." Because all my friends, whether they were doing civil or mechanical or electronics, everybody was going in software. So I said, "I want to do something in software."
- NKNikhil Kamath
Mm-hmm.
- 29:30 – 38:23
Micromax’s early days: From payphones to GSM innovation
- RSRahul Sharma
or so.
- NKNikhil Kamath
Uh, you started Micromax in 2000?
- RSRahul Sharma
No, ninety... I think 1998.
- NKNikhil Kamath
1998. With the three friends?
- RSRahul Sharma
Four friends.
- NKNikhil Kamath
Four friends.
- RSRahul Sharma
Four friends.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Started with three, fourth came from US and then joined, yeah.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Then started, you know, working on softwares, worked on a lot of SAP. That, that went down, then started working on e-commerce, that Y2K problems and all. So at that time, I was in US. I... So I was a BD guy doing marketing and sales, and rest of the other guys were doing the coding and everything. So at that time, we wrote a lot of, uh, B2B engines for e-commerce, um, and-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... and doing all that. So it, you know, that was time when Sun Microsystems was there, and-
- NKNikhil Kamath
Yeah
- RSRahul Sharma
... it was a, we had a .in, .com. And then that market went down, and then, um, then we realized that it is a very fast-moving market and you have to, you know, constantly change yourself very quickly to be relevant.
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
We moved on to embedded technology, started working with University of Irvine, California. They had an R&D center on embedded. Uh, we started working together.... And at that time, Nokia in India was looking for a machine-to-machine partner, M2M. HCL was their partner for their mobile phones, and they were looking for someone for a machine to machine. They said, uh, we got introduced, and they said: "Would you like to do something?" We u- you know, we used to write, uh, device drivers, doing, you know, work on, uh, uh, a lot of different architectures, ARM, PowerPC, and all that. Said, "Okay," started doing that. And then, uh, one fine day, I was just sitting with one of the guys from Nokia, Finland, and he showed me a, a product. I said: "What is this?" He said, "This is one of the product wherein if you put a SIM card in this, you can, uh, connect a, a telephone along with this, and, uh, it will replace the landline." So I said, "Good, so why did you make this product?" He said, "In Finland, you know, because there are a lot of snow and everything, you can't lay the copper wire, the telephone. So you can put a SIM card in this and connect a phone, and then you have a landline, because this phone is going to be fixed, and nobody's going to take it."
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
So he said, "Can you do something with this?" I said, "India, how much would this... We don't have market for something like this." So I took that product from him, and I said, "Okay, let me just play." And, uh, we found an opportunity, and I went back to him next day and said, "We would like to power the payphone machines," this. So we went to Airtel and all those guys, and, uh, all the GSM players said, "We can power payphones with one SIM card." At that time, payphone in India was only MTNL and BSNL, government companies-
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
-laying down the wire now.
- NKNikhil Kamath
You mean the STD center?
- RSRahul Sharma
STD center. STD booths.
- NKNikhil Kamath
Hmm.
- RSRahul Sharma
So they said, "Okay, how can you do that?" We said, "This is, uh, you know, with that phone," because we were writing device drivers and everything. We took that machine, changed the code and everything-
- NKNikhil Kamath
Mm-hmm
- RSRahul Sharma
... Put our software, attached the landline, and say, "You put a SIM card, and you can work." They said, "Good." And then, uh, it was also a solution, good solution for corporates, because corporates, if they want to have a connection straight away, you can just, uh, you know, integrate it with the EPBX systems and all. So it worked for them. And, uh, from a small Delhi-based company, we started growing to all the states and started supporting all the carriers. Airtel, that time it was Hutch-
- NKNikhil Kamath
Hmm
- RSRahul Sharma
... and Idea and all, and started supplying to them. The business was started doing reasonably okay. From three, four crore rupees annually, we started doing around hundred crore rupees in, you know, very quickly we scaled up.
- NKNikhil Kamath
What year was this?
- 38:23 – 50:47
How traveling to villages led to Micromax’s success
- RSRahul Sharma
crores per annum.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
So we were doing... We, like-
- NKNikhil Kamath
Did you have liquidity? Did you take out money from the business?
- RSRahul Sharma
No, we were just keeping the money, but I still, I, I just remember at that time, BMW came to India. I bought a BMW 3 Series-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... and thought, "Ah, but this is it."
- NKNikhil Kamath
In two thousand and six?
- RSRahul Sharma
Ha, so that time, then my... That was the first time when my parents realized that our son is doing something-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... because otherwise-
- NKNikhil Kamath
Yeah
- RSRahul Sharma
... they used to ask me, "Beta, what are you doing?" I said, "Yeah, fixed wireless terminals and all," and yeah. So coming back to the story, and so that guy called me, so he was, so I said, I... He said, "It's in Bengal somewhere. Why don't you go and check?"
- NKNikhil Kamath
Mm.
- RSRahul Sharma
I said, "I'll send some engineer." And he said, "No, a senior level escalation. Can you go yourself?" I said, "Okay." Took a plane, landed in Kolkata, took a cab, five hours drive near Bangladesh border. Saw, this all Krishna Nagar, Nadia, and all. Just saw the problem, fixed it, and then in the evening, coming back-
- NKNikhil Kamath
Mm-hmm
- RSRahul Sharma
... to catch a flight in late night in Kolkata. Mid, I saw, let's say, a village where there was no electricity, but there was a, there was an Airtel ISD PCO booth. So I asked my cab driver, I said, "Hey, can you stop the car?" I went inside the booth, and because I knew that if it is an Airtel, it must be using our equipment. So I said, "Uh, there's no electricity in the village. How are you running this booth?" He showed me a big truck battery there. He said, "Sir, we draw power from here."
- NKNikhil Kamath
Mm.
- RSRahul Sharma
I said, "Fine." I mean, we were not making phones those days. I was having a, let's say, a Nokia phone. There was no signal in my phone. I said, "There's no signal in my phone. How is, how are you drawing the signals?
- NKNikhil Kamath
Mm.
- RSRahul Sharma
He showed me a big twenty dB gain antenna mounted on a pole on his terrace. Typical Indian jugaad.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
He said, "Sir, "Yeah, signal comes from here."
- NKNikhil Kamath
Mm.
- RSRahul Sharma
I got more intrigued. I said, "Fine, there's no electricity. How do you charge the battery?"
- NKNikhil Kamath
Mm.
- RSRahul Sharma
He said, "Eleven kilometers away, there is a village, where there is electricity. In the night, when I shut down my shutter, I go there, charge in the night, and then come back in the morning." I said, "How much money do you make?" He said, "Around, let's say, four thousand rupees a month." Now, four thousand rupees a month in a village, there is no electricity, no entertainment, nothing, is big. Then I was traveling in interiors of Bihar, and I saw people charging, you know, asking twenty-five rupees or forty rupees to charge your phone-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... because at those days, there were different pins for different phones.
- NKNikhil Kamath
I remember, yeah.
- 50:47 – 1:00:00
Competing with China & Micomax’s manufacturing pivot
- NKNikhil Kamath
competition, which came into India post.
- RSRahul Sharma
Yes, so, so that was a time... And again, yeah, I will answer a couple of other questions which you were asking about-
- NKNikhil Kamath
Yeah, yeah
- RSRahul Sharma
... you know, why you wanted to-
- NKNikhil Kamath
Yeah
- RSRahul Sharma
... and all. So there were a lot of learnings also in between.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Uh, so for example, you know, when Meizu was raising the round, uh, with Alibaba-
- CPCarl Pei
Mm-hmm
- RSRahul Sharma
... we were deep down with Alibaba that time. Yeah, raising the round and, uh-
- CPCarl Pei
So our paths have been, uh, intertwined.
- RSRahul Sharma
Yes, and a pretty big one. At that time, we were raising, what, around eight, $800 million round at that time.
- NKNikhil Kamath
This is in 2000?
- RSRahul Sharma
14, and, uh, secondary-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... most of it.
- NKNikhil Kamath
Wow. [laughing]
- CPCarl Pei
Because the business was so... [laughing]
- RSRahul Sharma
Yeah. So, uh, it was, uh, because the, the business was throwing so much of cash.
- NKNikhil Kamath
Right.
- RSRahul Sharma
Yeah, so we said, "We don't need money," but, uh, you know, at that time, everybody wanted to connect it.
- NKNikhil Kamath
Yeah.
- RSRahul Sharma
You know, I remember-
- NKNikhil Kamath
You could buy a few more BMWs. Few more than few more. [laughing]
- CPCarl Pei
Few more, yeah. [laughing]
- RSRahul Sharma
So this was going well, and then we realized that, uh... So we didn't take that money. We said, "Okay, no, we are doing quite well," and we were- we said, "We already have so much of..."
- NKNikhil Kamath
Bad decision in hindsight?
- RSRahul Sharma
So we s- we thought that, you know, if we have taken care of, uh, the Finnish and the Koreans in that time, at that time the- later on, because that time we never knew, but in 2016, '17, you know, that was the time when the, you know, the Chinese brands started coming in. So we thought, "Anyway, we have taken care of them, so we can, you know, we'll take care of this also. It's okay-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... let's, we'll go head-on." But, you know, that was a very, very different game-
- 1:00:00 – 1:05:00
Apple’s vertical integration strategy: Lessons for companies & governments
- CPCarl Pei
their own technology, their own screen, their own whatever-
- NKNikhil Kamath
Mm
- CPCarl Pei
... processor.
- NKNikhil Kamath
I thought they're outsourcing more to Foxconn and they're-
- CPCarl Pei
For, for manufacturing.
- RSRahul Sharma
It's only for EMS.
- NKNikhil Kamath
What is EMS?
- CPCarl Pei
Assembling. Uh, you would tell better.
- NKNikhil Kamath
Just for assembling? Really?
- RSRahul Sharma
Yes.
- CPCarl Pei
So Apple used to be a consumer-focused company, right? So in the start, they were very small. They were competing against IBM and, like-
- RSRahul Sharma
Yeah
- CPCarl Pei
... big PC companies. So they targeted a niche consumer, the creative consumer, and they positioned the personal computer as a bicycle for the mind.
- NKNikhil Kamath
Right.
- CPCarl Pei
So if you have an idea, you can use your Apple computer to manifest that idea. In the '90s, they started acquiring, uh, software companies to then create their own suite of, uh, content creation tools, like iMovie-
- RSRahul Sharma
Yeah
- CPCarl Pei
... GarageBand. It's all to cater to the creator, right?
- RSRahul Sharma
Yes.
- CPCarl Pei
Beautiful industrial design, great software that helps you take your ideas into reality. So they, after some time, they really captured the creatives. Like Adobe, they have a, they had a partnership with Adobe.
- RSRahul Sharma
Yeah, yeah.
- CPCarl Pei
Adobe worked better on Apple computers.
- RSRahul Sharma
Yes.
- NKNikhil Kamath
Mm.
- CPCarl Pei
So once they got the creatives, the brand became really cool. So then normal people, they also wanted to feel creative, so therefore, I buy Apples, because I'm a, I'm a creative.... but then, so they won the consumer battle, and then to keep growing the, the share price, they needed to take the value back from their suppliers, 'cause they had outsourced a lot of the components. So in the recent 10 years, it's been a vertical integration strategy.
- RSRahul Sharma
Yeah.
- CPCarl Pei
Now they do their own processors. Actually-
- RSRahul Sharma
Yeah
- CPCarl Pei
... what we talked about before, they get the TSMC latest, uh-
- RSRahul Sharma
There you need allocation.
- CPCarl Pei
Yeah, they get the-
- 1:05:00 – 1:09:00
Learnings from Rahul’s risk-taking & resilience
- NKNikhil Kamath
Mm
- RSRahul Sharma
... 2020, we, uh, you know, in the, in terms of the brand, we said, "Okay"-
- NKNikhil Kamath
Just before COVID.
- RSRahul Sharma
Yeah, we said, "Okay, no more."
- NKNikhil Kamath
And then COVID could not have been fun.
- RSRahul Sharma
No more. [laughing] Correct.
- NKNikhil Kamath
[laughing] Right?
- RSRahul Sharma
Yeah.
- NKNikhil Kamath
Mm. When you go from a peak to a low, what is the one lesson that we can learn from your experience that you have learnt already?
- RSRahul Sharma
Today, our manufacturing is bigger than... You know, the revenue is way more bigger than what we used to do in our brand, which probably not most of the people will know.
- NKNikhil Kamath
Yeah.
- RSRahul Sharma
But we are doing way more better than what we used to do earlier.
- NKNikhil Kamath
Yeah. No, I know the Micromax comeback story.
- RSRahul Sharma
No, I know, I know.
- NKNikhil Kamath
I want to come to that next.
- RSRahul Sharma
I'm coming. So in, in between, you know, you're trying multiple things. I think what has worked for us, you know, which we later realized, that stick to your core.
- NKNikhil Kamath
What did you realize is your core?
- RSRahul Sharma
So my core was to remain with tech. So, for example, not start a real estate company.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Or real estate is doing good, go there.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Or something else is doing good, go there, or something... So this thing was already there. The whole manufacturing, the factories, what we created, you know, for Micromax, was already there.
- NKNikhil Kamath
Mm-hmm.
- RSRahul Sharma
So why don't we build on that and start doing for others? That helped, and that's how we... So at Micromax time, we were having probably one or we had two factories. Now we have four large factories, fifth coming up, and then, uh-
- NKNikhil Kamath
You just acquired a new factory as well?
- RSRahul Sharma
Yeah.
- NKNikhil Kamath
And now you're scaling. Do you feel like you're stronger the second time around than you were in the beginning? Less oblivious, more aware? Like, I feel like once somebody is scarred-
- RSRahul Sharma
Mm
- NKNikhil Kamath
... the next time they're a little bit more differentiated in their approach.
- RSRahul Sharma
This weekend I was thinking that.
- 1:09:00 – 1:23:34
Amit’s journey from education to building Noise
- NKNikhil Kamath
stories, him I know firsthand-
- AKAmit Khatri
Yeah
- NKNikhil Kamath
... and his I've read a bit, but your story is not so much out there.
- AKAmit Khatri
So, so I come from a small town, Bikaner, Rajasthan, and typical middle-class family. Father used to work with bank, uh, and-
- NKNikhil Kamath
Which bank?
- AKAmit Khatri
State Bank of Bikaner & Jaipur, if you would have heard of.
- NKNikhil Kamath
Yeah.
- AKAmit Khatri
SBBJ. Later on, they got merged with SBI. And, uh, grandfather was an advocate, so typical middle class. And when you're in a small town, the only dream is you become a doctor or an eng- engineer. But I think I was not geared up for that. I was a very mischievous kid, uh, academically not very strong. I mean, 60, 70% scorer at that time, uh, where people were, I think, 80, 85, or, uh... I was the eldest one in the family, so much more-
- RSRahul Sharma
... just two days type
- AKAmit Khatri
[laughing]
- RSRahul Sharma
När, när. [laughing]
- NKNikhil Kamath
No, no, he's fit.
- RSRahul Sharma
Yeah?
- NKNikhil Kamath
And he went to NIFT.
- RSRahul Sharma
Oh, really?
- NKNikhil Kamath
NIFT
- RSRahul Sharma
Yeah.
- NKNikhil Kamath
Nayi na?
- RSRahul Sharma
Hmm?
- NKNikhil Kamath
They are, the NIFT ones are the cool ones.
- RSRahul Sharma
Yeah, cool ones.
- NKNikhil Kamath
I have some colleagues who are from there.
- RSRahul Sharma
Yeah.
- NKNikhil Kamath
Sometimes over-smart, right? [laughing]
- RSRahul Sharma
[laughing] What is that?
- AKAmit Khatri
Fashion college.
- RSRahul Sharma
Oh.
- NKNikhil Kamath
Yeah, it's like where all the cool kids go.
- AKAmit Khatri
So anyways, uh, studied-
- NKNikhil Kamath
See, his shirt has a very differentiated color.
- 1:23:34 – 1:41:47
Roadmap for 20-somethings entering the electronics industry
- NKNikhil Kamath
electronic brand. It could be cell phone, it could be TV, it could be speaker, it could be earphone, it could be smartwatch. We want to, like, plot a roadmap of what they need to look at, how to identify the opportunity, which vendor to go to, how to test the product, and how to finally take it to market. We'll go into, do you sell on quick commerce? Do you sell on Amazon? Do you sell through physical distribution? So the first thing we thought we might do is establish market size. How big is the consumer electronic market, A, in the world, B, in India? How fast is it growing there, and how fast is it growing here?
- CPCarl Pei
Should I start with smartphones?
- NKNikhil Kamath
Yeah.
- CPCarl Pei
Smartphones globally is about 1.2 billion units every year. In India, it's, uh, 120 to 140 million annually, depending on what number you look at. Um, so if you assume that the ASP is $300, then on 1.2 billion, that's over $300 billion, just on the hardware side.
- NKNikhil Kamath
ASP is?
- CPCarl Pei
Average selling price.
- AKAmit Khatri
Average selling price.
- CPCarl Pei
Average selling price.
- NKNikhil Kamath
Very different in India compared to the rest of the world?
- CPCarl Pei
Probably, yeah. Every country is different, depending on the, the market dynamics.
- AKAmit Khatri
Per capita as well.
- CPCarl Pei
Yeah.
- NKNikhil Kamath
Where is the sweet spot? If I want to start making a cell phone today, where would I price it?
- CPCarl Pei
Personally, I don't think there's any more opportunity, um, and I wouldn't recommend any of my friends to [chuckles] go into this business right now. The market is very, very tough to compete in.
- AKAmit Khatri
But you need to understand that what exactly, if you want to make that, what exactly are you trying to solve?
- NKNikhil Kamath
Mm.
- AKAmit Khatri
Are you trying to, let's say, make a luxury brand?
- NKNikhil Kamath
Mm.
- AKAmit Khatri
Or are you make- going to make a mass brand?
- NKNikhil Kamath
Mm.
- AKAmit Khatri
Basis that, you need to figure out your TAM.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
That, what is the, the market I'm going to address? And basis that, you can define, okay, this is... That you know that then you can find the sweet spot. Because otherwise, the categories, like if you, if you see mobile phones, iPhone is-
- CPCarl Pei
... $1,000, and then your, you know, the average selling price, as you said, is right, to between the, you know, $250 to $300 in India.
- AKAmit Khatri
So m- maybe let me break it for India market perspective, so that at least-
- CPCarl Pei
Yeah
- AKAmit Khatri
... viewers could understand it well. In a category like, uh, truly wireless, for an example, the India market would be, like, 60 million units-
- NKNikhil Kamath
In a category like?
- AKAmit Khatri
Audio devices, for an example, like this. This market would be, like, 60 million devices, which is six crores.
- CPCarl Pei
Yeah.
- 1:41:47 – 1:48:02
Identifying gaps in the commodity market
- NKNikhil Kamath
of sitting with three of you. I have a million dollars. I want to build something in consumer electronics. I live in Bangalore in India. So you three have a conversation, and I will try and learn along the way and intervene once in a while. What else?
- RSRahul Sharma
Uh, we have already given the cards, for example. [chuckles]
- NKNikhil Kamath
Uh.
- RSRahul Sharma
You know, the glasses-
- NKNikhil Kamath
Uh
- RSRahul Sharma
... hearing aids.
- NKNikhil Kamath
Uh.
- RSRahul Sharma
Um.
- NKNikhil Kamath
Okay, what else?
- AKAmit Khatri
What nots, I'll be very clear. If,
- NKNikhil Kamath
Mm.
- AKAmit Khatri
if somebody's trying to go to a commodity market-
- NKNikhil Kamath
Mm
- AKAmit Khatri
... it's no go. It's a race to bottom. There is no winning there.
- NKNikhil Kamath
What is a commodity?
- AKAmit Khatri
I mean, let's say somebody says, "I want to do a earbud which is 1,500 bucks."
- NKNikhil Kamath
Mm.
- AKAmit Khatri
No go.
- RSRahul Sharma
No go.
- AKAmit Khatri
How will you win? I mean-
- RSRahul Sharma
Yeah
- AKAmit Khatri
... what's your right to win-
- RSRahul Sharma
Yeah
- AKAmit Khatri
... when there's overcrowded market and when large players are there, so...
- NKNikhil Kamath
I'm a content creator. I have distribution. Let's add that.
- AKAmit Khatri
I'll tell you, content creator also has a shelf, uh, threshold of, let's say, whatever million followers they have, they could reach to 5,000 units, 10,000 units, not beyond that.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
Every category-
- NKNikhil Kamath
Didn't somebody, a content creator-
- AKAmit Khatri
Yeah
- 1:48:02 – 1:57:40
Disruption in smartphones through design and AI opportunities
- NKNikhil Kamath
Can't I look at the same devices but relook design alt- altogether?
- CPCarl Pei
And do what design?
- NKNikhil Kamath
Like, relook my design philosophy altogether. Why do earbuds have to look like this? What if I ch- change the form factor completely?
- CPCarl Pei
Uh, then there's PMF risk.
- NKNikhil Kamath
What is PMF risk?
- CPCarl Pei
Product-market fit.
- RSRahul Sharma
Product-market fit.
- CPCarl Pei
... risk. So if you look at our products, that product and this product, design is different, but actually there's very low PMF risk because these are products that consumers already know how to use, what to use it for. They already buy a lot of them every single year. If you deviate too much from the current product definition, then you have to, you have to take care of the risk, and then it's a question of whether the risk versus the rewa- reward could potentially be worth it.
- NKNikhil Kamath
But there's no way to test it?
- CPCarl Pei
Y- you can test it. You can do a mock-up. You can even use AI to generate a, a picture and then go and speak to people.
- NKNikhil Kamath
But I think besides mock-up, it's all about functionality, usage, so that also plays a bigger role.
- CPCarl Pei
Mm.
- NKNikhil Kamath
So I think we don't want to change people behaviors the way they are doing, just little changes.
- CPCarl Pei
It's a, it's a different, uh, business strategy. I think we're in the fast follower strategy or late mover strategy.
- NKNikhil Kamath
Explain?
- CPCarl Pei
So we're, we're coming into an industry that already got created by other people, and we're just trying to carve out our space within a big industry, a billion units a year industry, that was created by other people. So then we don't take the risk. We, we come into a very mature category, and then we can differentiate through design. But if you're creating something new, like back in the day, uh, drones were new, or now electric vehicles are new, or robotics, then you don't have to differentiate on the product because the technology is fresh enough as a differentiator. But then you have the execution risk on the technology and also the PMF risk on whether consumers will wanna adopt this product or not.... Um, I personally think late mover is easier for me. Um, that, that requires a different way of thinking, more survival-focused, more capability building, more long-term thinking. Whereas the, the, the technology approach is more like you have one shot. If it works, it works. If it doesn't work, you've got to start over again.
- RSRahul Sharma
So just asking Carl on- Yeah, yeah. So Carl, on the phones, for example, where do you think the-- some disruption can happen?
- CPCarl Pei
Um, I think the disruption can happen on the OS side. I think the hardware side is very hard to, to differentiate on, because all these suppliers that we have, they're all very concentrated, and they're very strong, and they're investing in their product road map, upgrading their batteries and processors incrementally every year. Like, we don't-- we can't really differentiate. And as a supplier, you want to sell to everybody, right?
- RSRahul Sharma
But if a phone, you know, the form factors are changing. Now, fold level phones are coming in. Don't you think if you can bring the f- the cost by innovation of the fold level phones down, it will have a mass adoption? Because relatively, it's, uh, it's a game-changing thing, because, you know, from a single screen, you're going to a, a bigger screen.
- CPCarl Pei
Yeah.
- RSRahul Sharma
Or maybe a triple screen.
- CPCarl Pei
That's also not up to us, right? Because the screen manufacturer is the real decision-maker for, for that product. It's not us.
- AKAmit Khatri
All- also, just to adding onto it, screen manufacturer is also booked, and he also want to take advantage of it, because he knows after three years, there's gonna be the same price as a normal screen.
- CPCarl Pei
Yeah.
- AKAmit Khatri
So he will also not reduce the price.
- CPCarl Pei
And you wanna go with the biggest vendor instead of a startup like us. So I think for us, our biggest opportunity to diff- differentiate in our next phase is, uh, through the OS.
- AKAmit Khatri
I, I think the next differentiation for all of us would be through software only.
- NKNikhil Kamath
But aren't you using one of two softwares which are in the market and operating your devices on that?
- AKAmit Khatri
So we-- so, like, phones is a different universe. They're Android or iOS, but in our case, we work on OpenRTOS, uh, operating system, where we build our, uh, operating system layer.
- NKNikhil Kamath
Right.
- 1:57:40 – 2:01:13
Today’s youth vs. yesterday’s corporations
- NKNikhil Kamath
I feel like things like Louis Vuitton, Gucci are not cool today like they might have been 10 years ago. Everybody wants streetwear, the new independent brand. Look at how you're dressed, for example. Do you think there's a play there? If I start a consumer electronic company where I will use the narrative of not a corporation.
- CPCarl Pei
I think there's an opportunity, but I think you would ne- first need to, uh, start in a different category.
- NKNikhil Kamath
Yeah.
- CPCarl Pei
Like, make a fashion brand, make that successful.
- NKNikhil Kamath
Yeah.
- CPCarl Pei
Then you have the credibility to go to the consumer electronics suppliers to get them to want to work with you. 'Cause they've seen so many, um... These guys have seen so many failures and so many pitches, they're very pragmatic.
- NKNikhil Kamath
That's an interesting idea. So you're saying start a independent design-themed brand, start elsewhere, succeed, and then transition into this?
- CPCarl Pei
You have to have volume. Like, that's the core of the consumer electronics industry. To be able to work with these suppliers, you need to show the numbers, um, that they can believe in.
- AKAmit Khatri
So look at our case, like, uh, we didn't come from electronics or consumer electronic background. So in my wildest dream, I could have never thought of, uh, you know, working in a space which is led by mobility brands or other brands. So we started with mobile accessories. It's like it- I still say it's a T-shirt business. These are simple cases, you just print designs, and designs are a character. And we started understanding the user-consumer pattern and knowing, and started building vol- volumes. Our partners saw a confidence in us, "Yeah, so they are doing good volumes. We could test something with them."
- NKNikhil Kamath
Mm.
- AKAmit Khatri
So maybe our entry also was not on day one here. We learned consumer from a basic business.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
But by the way, I have a very fundamental question, which I have, uh, realized as a founder, what is the segment of the market you want to chase?
- NKNikhil Kamath
Mm.
- AKAmit Khatri
Like, what customer you want to-
- NKNikhil Kamath
I'm asking you that question. I don't have data like you do.
- AKAmit Khatri
No, no, it's not about, uh, uh, what I want. It's about what you want to build. I'll tell you, for an example, the game what he's doing. He's saying, "I'll not fight the cheapest in the market," like he's now doing the Xiaomi play.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
But what he is doing, he's in the mid segment, which is super painful, which needs time. His gestation would be... Success will not be short-term. He would have a patience of three to four-year capital to build it, and then he- there are chances he might see and might not see success.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
So as founders or whosoever, young people want to start, they need to be very clear what segment-
- NKNikhil Kamath
Mm
- AKAmit Khatri
... they are trying to build, because different segment, when you talk about design-
- NKNikhil Kamath
What if I come to you with a blank slate, what segment would you recommend I build in?
- AKAmit Khatri
No, if you ask me, I would say don't go for the mass. Mass is important, but have some brand aspiration, have your identity, have your brand uniqueness. No point to fight for a commodity that's a race to bottom. You buy for $20, sell for $20, somebody else will, else will sell for 15, 12, 11. Have your own community, one narrow cohort of users who you are selling, and that community should be your evangelist then.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
And that always happens at somewhere little above, not, not to the basics. You're not solving basics of anyone right now.
- NKNikhil Kamath
How does India build a supply chain?
- RSRahul Sharma
Great. So it's a process.
- NKNikhil Kamath
Mm.
- 2:01:13 – 2:07:21
Building India’s supply chain & unlocking its market opportunity
- RSRahul Sharma
initially, you start with EMS.
- NKNikhil Kamath
EMS is?
- RSRahul Sharma
EMS is the electronic manufacturing services-
- NKNikhil Kamath
Mm.
- RSRahul Sharma
-that you start the EMS process. Then you start getting the design-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... out there in country. Then after design, you start working on the supply chain, the component ecosystem.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Right. So this is, this all is a process one by one. I mean-
- NKNikhil Kamath
If I'm, I've, I'm 25, and I want to start a component company-
- RSRahul Sharma
Uh.
- NKNikhil Kamath
-I raise a little bit of money, put up a factory, how will I ever compete with somebody in China who's manufacturing millions of units?
- RSRahul Sharma
No, so you can do that. So there is so much of material which goes inside.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
For example, a glue on a glue machine, on SMT, is a glue. That's glue... So I just found out that's, that glue, the particular glue, is still coming from China. We can-... why can't we make that here? And I study, you know, I started finding out why the chemical companies can make that glue out here. You can do that.
- NKNikhil Kamath
Hmm.
- RSRahul Sharma
Probably there is maybe somebody has to find out and get into that.
- NKNikhil Kamath
Hmm.
- RSRahul Sharma
I know someone, you know, who, who said, "Okay, after finishing my engineering, what should I do?" and all, and then went on search that what India is importing a lot, and he found out all the coins material, right? For the coins, currency coins, the material we still import. He started making that. He started supplying that. So you just-
- NKNikhil Kamath
Is that an opportunity for me? I think US will-
- RSRahul Sharma
So-
- NKNikhil Kamath
-in the tariff world, not buy from China like they once did.
- RSRahul Sharma
Components is a huge opportunity. So, for example, now India is projecting a market of $500 billion by 2030.
- NKNikhil Kamath
Hmm.
- RSRahul Sharma
It's a huge market.
- NKNikhil Kamath
Hmm.
- RSRahul Sharma
60% of that is components.
- NKNikhil Kamath
Hmm.
- CPCarl Pei
And we're also incentivized to use the locally manufactured components.
- NKNikhil Kamath
If manufacturing is coming here, 100% components will come here, and like batteries-
- 2:07:21 – 2:16:45
An electronics launchpad for young entrepreneurs
- NKNikhil Kamath
solving for the supply chain problem dependency that we're talking about, if that is the go-to action that happens because of the time we've spent today, I think we can all say today was worth it.
- AKAmit Khatri
Also, like, uh, we spoke-
- RSRahul Sharma
And I think we will need 5,000 of those kids-
- NKNikhil Kamath
Yeah
- RSRahul Sharma
... because it's a hu- it's a huge universe, and we don't have it here.
- NKNikhil Kamath
Yeah.
- RSRahul Sharma
We have to bring it in.
- NKNikhil Kamath
Yeah.
- AKAmit Khatri
And by the way, like, brands like us are desperately looking for people to do it for us. I mean, it's our need also.
- NKNikhil Kamath
What is the biggest need? Say two things that you want me-
- AKAmit Khatri
Let's say for, for us-
- NKNikhil Kamath
Hmm
- AKAmit Khatri
... for an example, in, in watches, we do the largest component is the screen. The screen is, like, $5 or something, and if I import, import, there is a 15% duty, which means every screen I'm paying, what?
- RSRahul Sharma
... one and a half, close to one dollar?
- CPCarl Pei
Mm.
- RSRahul Sharma
If you save, make it in India, it's a huge volume. It's maybe half a million, one million screens a month.
- NKNikhil Kamath
What is the margin in screen business?
- RSRahul Sharma
I'm sure if we cost arbitrage, we, if you look into it, if it still makes ten percent or seven percent, it's just one SKU you have to keep producing.
- CPCarl Pei
Oh, the sm- you know, the smartphone screens from China? Those companies are losing money to sell the screens.
- RSRahul Sharma
Yeah.
- CPCarl Pei
'Cause they have policies that subsidize the creation of that, uh, industry. So at least for the smartphone screens, it's very hard for-
- NKNikhil Kamath
So you're saying our import duty has to be higher than their subsidy, at the least?
- CPCarl Pei
At the least, if... Yeah. Yeah, yeah.
- NKNikhil Kamath
Right.
- RSRahul Sharma
So one is import duty, and second, of course, the PLI schemes coming on components- Correct.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
-will incentivize to use more Make in India.
- NKNikhil Kamath
Any advice to the government? Because I'm sure somebody will be watching. How should the PLI scheme be structured for components?
- RSRahul Sharma
It's already structured. It's gonna, just gonna be announced in two, three days. He would be a part of it. [chuckles] So... [chuckles]
- NKNikhil Kamath
It's a good scheme.
- 2:16:45 – 2:22:26
India’s semiconductor push & restarting efforts
- NKNikhil Kamath
Mm
- RSRahul Sharma
... only one fab, which was in Mohali.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Government-owned, long back.
- NKNikhil Kamath
Yes, yes.
- RSRahul Sharma
Doing probably, you know, hundred nanometers or something like that.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Today, TSMC is doing two nanometers.
- NKNikhil Kamath
Mm. Two, three, two, three, correct. Mm.
- RSRahul Sharma
So of course, I mean, you can't catch up with two nanometer. Even, see, China started their semiconductor program twenty years back.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
They're still not able to compete on that, but it is very, very important. All four of us, like, fifteen years back or so, have you ever thought that semiconductors will be more valuable or important than oil? Not even a thought came across to our mind, back then.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
But if you see today, it is.
- NKNikhil Kamath
Mm. And I'm assuming the same thing. I, I'm assuming US, China continue to fight and Taiwan becomes... I don't know, maybe our friend in that fight or maybe not our friend. If our supply chain gets d- disrupted, where we can't get those two mm semiconductors, what does India do then?
- RSRahul Sharma
It's a tough question because, you know, it is divided into multiple parts.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
So it's not only about two nano... So two nanometer is only one segment. Then you have... So government is saying, "You start with, let's say, thirty-five nanometers right now is good enough," because you have to start coming slowly one by one.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
Right? So even that, you know, if we can start at thirty-five, a- because those are larger components-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... which can go into, you know, other things, you know, refrigerators and TVs-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... and vacuums and, you know, on cars and all. And then slowly, slowly, you start coming in for the ITs and the mobile phones.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
But at least we start attacking the, you know, the thirty-five, forty nanometers, twenty-five nanometers, start attacking that.
- NKNikhil Kamath
Mm.
- RSRahul Sharma
[clears throat] So that is the opportunity. I mean, straightaway, though, you know, you can't leapfrog. As I said, China have put billions and billions of dollars-
- NKNikhil Kamath
Mm
- RSRahul Sharma
... and still they are not able to achieve that. And there are m- and, and again, it's a country play. A company can't build something like this.
- 2:22:26 – 2:25:41
Future of TV: One UI for all streaming apps?
- SPSpeaker
username, let's say nikhil@gmail.com, and then everything from your Netflix to your Zee, to your Sony, as per your choice and recommendation, everything starts coming on one screen. You're not going in an app.
- NKNikhil Kamath
Mm.
- SPSpeaker
That's one area, because, again, it's an evolving space. And then you bundle it along with the hardware piece-
- NKNikhil Kamath
Mm
- SPSpeaker
... wherein you move on a SaaS model.
- NKNikhil Kamath
How do you, um... I'm pretty interested in this business model, because as a content platform, you don't want to be unbundled, right? You want your own app, your own user experience.
- SPSpeaker
Yes.
- NKNikhil Kamath
How, how do you get their stuff? Like, it's not in their incentive to unbundle their content.
- SPSpeaker
Like you're saying, how do you get access to that content?
- NKNikhil Kamath
Yeah, for instance, Netflix. If I'm Netflix, and you say you just want to take the content-
- SPSpeaker
You know, apart from Netflix, you take some other example, because that's a different animal altogether.
- NKNikhil Kamath
Hotstar.
- SPSpeaker
Let's say, yeah, Hotstar, yeah.
- NKNikhil Kamath
So I have my own app.
- SPSpeaker
Mm.
- NKNikhil Kamath
I have my own users. I don't want to give you my content, because then I lose my competitive advantage, then my content becomes a commodity on your platform. So I, I mean, the platform, the content platforms, they would, uh, try and hedge against this, right?
- SPSpeaker
So if there are, like, say, twenty-five apps, which are the most widely used apps out there, and out of twenty-five, ninety percent of the apps, you're able to get inside the app and, uh, get the, you know, permission for recommendation and everything, and then, you know, put it on your screen-
- NKNikhil Kamath
Mm
- SPSpeaker
... for the user, I think it's, it's acceptable.
- NKNikhil Kamath
Mm. So for them, it's like incremental?
- SPSpeaker
Yes.
- NKNikhil Kamath
If I don't work with you, I won't make this money. Might as well make the money.
- SPSpeaker
Because they also need distribution.
- NKNikhil Kamath
Yeah. So then, then you have a big, a few big ones that are harder to negotiate with.
- SPSpeaker
They will, they will come in scale.
- NKNikhil Kamath
Yeah.
- SPSpeaker
So once you achieve scale, they will say, "All right."
- NKNikhil Kamath
Yeah.
- SPSpeaker
"We, we, you know, well, so..."
- NKNikhil Kamath
I get it.
- 2:25:41 – 2:35:58
Can India build a global ecosystem in electronics?
- SPSpeaker
I think if India wants to develop its own smartphone ecosystem, starting from the factory EMS side is very good. Uh, that's already happening. Incentivizing foreign and domestic players to, to build here, it's already happening. I think to reach the next stage, um, it can't just be manufacturing and exports, because ultimately, that's not the highest value add. The next stage will be to design and engineer here as well. So what is the next stage policy after the goal of PLI has been a- accomplished? What is the next stage plan? I'm, I'm not sure. I, I's I'm just starting to spend more time and to, to learn more about this. I think to your question that what can we do, if you see what they have done in last twenty-five years-
- NKNikhil Kamath
Mm
- SPSpeaker
... in terms of so-
- AKAmit Khatri
... all the government policies. So we're discussing about incentivizing, that is one. That is a one incentive, but rest of the other enablers, for example, the whole supply chain in terms of materials and everything, they have worked a lot deeper on that segment. In terms of logistics, they have created logistics parks-
- SPSpeaker
Mm.
- AKAmit Khatri
-to enable that. Today, if we are talking about, for example, now we have, uh, the, let's say, iPhones going and exporting and doing all those sort of things.
- SPSpeaker
Mm.
- AKAmit Khatri
The way we are expanding, you will need two full, bigger, you know, large aircrafts every week to ferry the product from here to Chicago. We need to have that.
- SPSpeaker
Mm.
- AKAmit Khatri
We need to build, you know, build bigger ports-
- SPSpeaker
Mm
- AKAmit Khatri
... wherein you can reduce the time. Because they have done, taken all that measures, so not only in one segment, because we talk only about this, but every segment they have done, you know, with all those policies.
- SPSpeaker
Yeah, I think consumer electronics is, um, very expensive and difficult thing for somebody without experience-
- AKAmit Khatri
Yeah
- SPSpeaker
... to all of a sudden go in.
- AKAmit Khatri
Experience is key, I believe. Without that, you can't do. And you, in fact, can't do also, I personally think.
- SPSpeaker
Yeah.
- AKAmit Khatri
Doing is expensive only, but you'll, you'll hundred percent make mistakes.
- SPSpeaker
I think we've, we've found a c- a couple of themes, you know, where people could start. Something more focused, something more niche, lower risk, lower CapEx.
- AKAmit Khatri
Mm.
- SPSpeaker
Start from there, evolve from there. It could be on the consumer side with the clothing or accessories. Could be on the supply chain side with, uh, parts of the stack that are, uh, easier to make, and then just evolve from there. Could be on the distribution side with content creation as a means of distributing, uh, information.
- AKAmit Khatri
But, uh, Rahul, what is your thought? We have seen, uh, all brands across the globe coming to India in consumer electronics. Hardly there are brands who have gone out.
- SPSpeaker
To gone?
- AKAmit Khatri
To gone outside India. So-
- SPSpeaker
Indian brands?
- AKAmit Khatri
Yeah, Indian brands. Forget Southeast Asian countries for a while, but none of the brands have gone outside our home turf and played a game there. Do you think, uh, world needs, need some new-age brands? I have solid thesis for that.
- SPSpeaker
Well, tu pehle bata.
- AKAmit Khatri
So I personally think India as a country... I mean, we all work with scarcity mindset. So what has happened that what a US or a European entrepreneur would try to solve a problem by throwing a dollar, a dollar is 90 rupees for us. So what I'm trying to say, for us, every penny counts. And for something what they're producing for $100, a similar great quality product, Indian entrepreneur could build for, let's say, 30, 40% cheaper than them. We have, uh, captive consumption. Entrepreneurs now are very smart. They are very evolved, traveled, done across. Why, why can't we take that arbitrage and take these brands to the globe? I mean, we are good at marketing, by the way, Indian entrepreneurs. Software, we are good at. Hardware, we can learn from our peers. Why can't Indian brands... Why can't we build brands who are based out of India and, uh, move to global scale? There are no brand existing. Everywhere there are, uh, old traditional brands.
- SPSpeaker
It's starting now, right?
- AKAmit Khatri
Yeah.
- 2:35:58 – 2:42:44
Health wearables & EdTech opportunities
- AKAmit Khatri
a fitness device, but I'll not track it." I mean, you would see a guy wearing a Whoop, I was talking, and eating a McDonald's burger and a cola and 100 kilos.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
So it's just visual, uh, cues to tell people that, "I belong to this universe where I know. I want to know what I am," but, uh, they are not cautious.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
I think they're a little bit aware of it, but not there. India is a market. Internationally, yes, people are more and more health conscious. Preventive healthcare is-
- NKNikhil Kamath
You know that patch which measures-
- AKAmit Khatri
CGM
- NKNikhil Kamath
... in- insulin spikes?
- AKAmit Khatri
Yeah.
- NKNikhil Kamath
I've always been thinking that at, at some point, an Apple Watch can start doing that. Do you think that's an opportunity, if your watch has a CGM monitor in it?
- AKAmit Khatri
So if you look at use cases, so I think these devices... Okay, diabetic is a very big, uh, used case, uh-
- NKNikhil Kamath
Mm
- AKAmit Khatri
... this problem, and this doesn't work, by the way. Nobody, nobody uses it. For us, we have used for wellness-
- NKNikhil Kamath
Mm
- AKAmit Khatri
... but diabetic patient also doesn't use it. It is 5,000 bucks. It's too expensive, and nobody want to prick it every time.
- NKNikhil Kamath
Mm.
- AKAmit Khatri
So we feel wearable gonna divert towards health side, like we were talking about, health as a segment. 35 plus, you start getting those problems. Apple is 100% working on it, but Apple will only come when it becomes, uh, really solid, mainstream, proven, because it's health.
- NKNikhil Kamath
Is there no opportunity unique to India?
- AKAmit Khatri
No, there's an-
- NKNikhil Kamath
What do we want in health that other people don't want, which Apple won't get?
- AKAmit Khatri
No, I think, no, this is a good space if somebody's working on it. Uh, honestly, I would like to invest in a space where people are working on, uh, CGM. So Apple is working. Samsung has a huge R&D center in Bengaluru, where they are working on, uh, blood pressure and CGM, uh, on device, where it's non-invasive. So I think in two, three years' time, you'll see it there.
- NKNikhil Kamath
Mm.
- SPSpeaker
I believe in health. Health has a PMF in consumer electronics, and another field that has PMF is, uh, children's education. Parents are always willing to invest in the future of their kids.
- NKNikhil Kamath
What would that look like? We have a common friend who is building this company called Super Learn, where he's trying to build a tablet-
- SPSpeaker
Mm-hmm
- NKNikhil Kamath
... which costs $150, where you can't, like, really browse the net-
- SPSpeaker
Mm
- NKNikhil Kamath
... and go to YouTube and Netflix, but replace your school bag with that device. You mean learning like that?
- SPSpeaker
Mm.
- NKNikhil Kamath
Do you think something like that could work?
- 2:42:44 – 2:43:21
Advice for 20-somethings who want to break into this industry
- RSRahul Sharma
So that would be one thing.
- CPCarl Pei
I would say be really sure that you wanna do something. Um, it's, it's not always fun. Um, I think most people should not be entrepreneurs. Most people have a much higher quality of life doing other things, specializing in a, a tech field or working for somebody else. Um-
- NKNikhil Kamath
Very inspiring advice to wannabe entrepreneurs, Carl, I must say. [chuckles]
- CPCarl Pei
It's better to, better to say it now, right? [laughing] Rather than finding out down the line.
- RSRahul Sharma
Yeah, ...,
- CPCarl Pei
Just be really sure.
- RSRahul Sharma
Yeah.
- CPCarl Pei
I think it's, like, it needs to come from a, a deep passion around something-
Episode duration: 2:46:40
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