Ep #23 | WTF are Consumer Electronics? | Nikhil ft. Carl Pei, Rahul Sharma & Amit Khatri

Nikhil Kamath 0:00 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.

Speaker 0:50 Mm-hmm.

Nikhil Kamath 0:51 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.

Speaker 1:10 Mm-hmm.

Nikhil Kamath 1:11 But

Nikhil Kamath 1:12 maybe we start with Carl.

Carl Pei 1:14 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.

Speaker 1:46 Right.

Carl Pei 1:46 I had a PC.

Speaker 1:47 Yeah.

Carl Pei 1:47 It didn't have the FireWire, uh, connection, so I had to buy a... First, I got the iPod. I didn't know-

Speaker 1:52 Mm

Carl Pei 1:52 ... you couldn't connect it to the-

Speaker 1:54 Right

Carl Pei 1:55 ... to the PC. Then I had to buy a PCI card for FireWire-

Speaker 1:58 Mm

Carl Pei 1:58 ... install that to even be able to connect the iPod. And back then there was no iTunes, so it was RealPlayer-

Speaker 2:06 Mm

Carl Pei 2:06 ... 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.

Speaker 2:21 Mm.

Carl Pei 2:23 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-

Speaker 2:33 Yeah

Carl Pei 2:33 ... in the beginning.

Nikhil Kamath 2:34 Where was school, Carl?

Carl Pei 2:35 That was in Stockholm.

Nikhil Kamath 2:36 Stockholm.

Carl Pei 2:37 Yeah.

Nikhil Kamath 2:37 What year are we talking about?

Carl Pei 2:39 iPod. When was iPod? Uh, 2001?

Nikhil Kamath 2:43 Yeah, you're 36 today, right?

Carl Pei 2:44 Yeah.

Nikhil Kamath 2:44 I mean-

Carl Pei 2:44 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.

Speaker 2:59 Mm.

Carl Pei 3:00 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.

Nikhil Kamath 4:05 Do you still that... feel, feel that way about Apple?

Carl Pei 4:07 No. It's a very different company now.

Nikhil Kamath 4:09 When did it change?

Carl Pei 4:11 I think the change has been gradual. I, I think, um, [tsking] uh, the two CEOs have had a very different approach to running the, the company. Um, I mean, the stock price doesn't lie. I think Tim Cook has done a great job on the, on the share- uh, shareholder value creation side, but when it just comes to inspiring a young guy or a young person to take a career in tech, I think the old Apple was way better at that. Um, so really inspired by those products. And then I was chronically online as a kid. My parents were busy, they were always at work, but I got, um, a laptop computer, and I got, uh, fiber internet at a very young age because the infrastructure was pretty well developed in, in Sweden. Um-

Speaker 4:55 So at 12, you had-

Carl Pei 4:56 Yes

Speaker 4:56 ... fiber and phone, access to phone and-

Carl Pei 5:00 I had a Nokia 3210.

Speaker 5:02 At 12, at 12 years old?

Carl Pei 5:03 Yeah. [chuckles]

Carl Pei 5:05 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.

Speaker 5:26 Yeah.

Carl Pei 5:26 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-

Speaker 5:37 Wow!

Carl Pei 5:38 I was very jealous-

Speaker 5:39 Mm

Carl Pei 5:39 ... 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.

Nikhil Kamath 5:53 What's really working for Y Combinator? We're trying to start something like that-

Carl Pei 5:58 Mm

Nikhil Kamath 5:58 ... called WTF Fund, which is a non-dilutive grant program, where we don't take equity, so not-

Host 6:05 ... not too much like Y Combinator, but a different version of it. Why have they been so successful?

Carl Pei 6:13 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-

Host 6:52 Do you think it's network or access to capital?

Carl Pei 6:54 The capital is very little, actually, right?

Host 6:57 Half a million.

Carl Pei 6:58 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-

Host 7:18 Mm-hmm

Carl Pei 7:18 ... 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.

Host 7:27 Okay,

Host 7:28 and then?

Carl Pei 7:29 So I was planning to go to YC, and then, uh, I was playing a lot of games.

Host 7:35 Mm-hmm.

Carl Pei 7:35 A lot of League of Legends at that time. Uh, so wasn't very-

Host 7:39 Games as in, like, video games, or?

Carl Pei 7:40 Yeah, like, uh, online-

Host 7:42 Online games

Carl Pei 7:42 ... 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-

Host 7:52 Mm-hmm

Carl Pei 7:52 ... back then.

Host 7:53 Mm-hmm.

Carl Pei 7:54 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.

Host 8:16 For Meizu?

Carl Pei 8:16 For Meizu.

Host 8:17 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.

Carl Pei 8:25 Yeah?

Host 8:25 Yeah.

Carl Pei 8:26 The first Chinese smartphone.

Host 8:27 Yes.

Carl Pei 8:28 Um...

Host 8:28 Was Meizu.

Carl Pei 8:29 They made really great MP3 players before.

Host 8:31 Yeah. Mm-hmm.

Carl Pei 8:32 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-

Host 8:44 Mm-hmm

Carl Pei 8:44 ... 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.

Host 9:14 So the founder of Meizu called you himself?

Carl Pei 9:16 The CEO.

Host 9:17 Yeah?

Carl Pei 9:17 The professional CEO.

Host 9:19 Wow! Okay, and you were in Nokia for three months-

Carl Pei 9:23 Yeah, that was before that-

Host 9:24 Before that

Carl Pei 9:24 ... just for, like, a summer internship.

Host 9:26 Right. And after Meizu?

Carl Pei 9:29 Uh, so I didn't stay that long. Um, I think I stayed, like, a year. I left because I quickly realized that it was a family business, so the key positions were all family members, and it's hard to build a very big company like that, I think.

Host 9:45 Was the professional CEO a family member?

Carl Pei 9:48 He wasn't, but imagine how hard it was for him to [chuckles] to do his work.

Host 9:53 Right.

Carl Pei 9:53 Um, but head of finance, head of international, um, it's probably not gonna work. So, uh, I started applying for jobs. I applied for Xiaomi, I applied for, uh, OPPO, I applied for another company that's no longer here called Smartisan.

Host 10:10 Mm. Yeah, I know.

Carl Pei 10:11 Yeah. Yeah. Um-

Host 10:13 Smartisan, they had that, they had that-

Carl Pei 10:14 This is based, a Bangalore-based startup, right?

Host 10:17 No, no, no, no, no, no. This is, uh, based out of, uh, Beijing.

Carl Pei 10:21 Yeah, back, back in the day.

Host 10:23 With their Hammer UI and all that. W- is it?

Carl Pei 10:26 Mm-hmm.

Host 10:27 Yeah?

Carl Pei 10:28 Yeah, they did some good design.

Host 10:29 Yeah.

Carl Pei 10:30 Um, so the Smartisan guy never responded to me. Um, I interviewed at Xiaomi and OPPO.

Host 10:35 Mm.

Carl Pei 10:35 And, uh, to be honest, I think back then, Xiaomi was a rocket ship, like a venture-backed... I think Sequoia and, like-

Host 10:43 Mm

Carl Pei 10:43 ... bunch of really well-known VCs were backing them.

Host 10:48 DST and all those guys.

Carl Pei 10:48 DST.

Host 10:49 Yeah.

Carl Pei 10:50 So I was actually quite intimidated by the people I met there. Like, everybody I, that interviewed with me at Xiaomi felt very aggressive, like, results-oriented, very smart. Whereas, um, when I interviewed with OPPO, it felt more like a traditional manufacturing culture. So selfishly, I thought that I, if I join this, uh, less aggressive culture, I can shine more.

Host 11:14 Did you get a job in Xiaomi as well?

Carl Pei 11:16 Uh, I dropped out of the interview process after, uh, w- we made an agreement with OPPO at that time. Yeah, so then... And then OPPO also saw the rise of Xiaomi, 'cause Xiaomi was selling phones online. They were the first to do that in the world, and they could undercut the other people because the distribution cost was a lot lower. So OPPO was also, uh, trying to find a strategy to hedge against, uh, the rise of Xiaomi. So, so they created a new brand called OnePlus. Um, supposed to be online by leveraging the supply chain that OPPO had built, 'cause Xiaomi was still building their supply chain. They didn't have those advantages.

Host 11:54 Is OnePlus still a part of OPPO?

Carl Pei 11:56 Yeah. Yeah, yeah. So then, um, I had just joined, and I was like: "Hey, y- I can't just join, and then you start a new company. Like, I, I wanna, I wanna be a part of the new company." But then I was told that the new company is not for international, it's just, just for, for China.... to fight Xiaomi in China, but I kind of, uh, made the case that it doesn't hurt, right? Like, have- if I can run international, it's all free money. Like, you, you, you guys can still focus on China, and everything else is just extra on top of that. So that's how I, in the beginning, got the opportunity-- I was only 24, uh, [chuckles] to run international.

Nikhil Kamath 12:39 Were you more a marketing person at this point, or were you more the technical person at this point?

Carl Pei 12:43 I was more, uh, marketing, I think. I was kind of like a... 'Cause ever since I was 12, when I got that computer, I started making websites.

Nikhil Kamath 12:51 Mm-hmm.

Carl Pei 12:51 And then I built traffic, sold advertising. So like, just had a deep desire to make money when I was young. So more like business/marketing, just trying to make it work, hustling. Um, so that's kind of what we did. After one year, after launching the product at OnePlus, China did $100 million in revenue. International did 200 million. China lost money, international made money, and then we decided to pivot the entire company to be more focused on-

Rahul Sharma 13:20 International

Carl Pei 13:21 ... international, 'cause the competition in China was too high.

Rahul Sharma 13:23 Yeah.

Carl Pei 13:24 So that, that was the OnePlus, uh, journey. Spent seven years at OnePlus. Um, very grateful, because I was just a kid, and, like, being able to participate in such a-

Rahul Sharma 13:37 Yeah

Carl Pei 13:37 ... high CapEx industry without needing to use my own money. I didn't have money. Um, so very grateful for all those opportunities, allowing me to fail with a lot of crazy ideas and learning from those. Uh, ultimately, so it's kind of like a CPG strategy, where we buy components from different suppliers, we package the components, and we have a unique position in the market, design, brand, and sell the product. Uh, I had done that for seven years. I didn't feel like that's what I wanted to do my entire life. Um, I want to not only implement other people's technology, I also want the opportunity to, uh, eventually impact how people use technology, so I knew I had to go independent. Um, so I left in 2020, in September, and, uh, on my birthday, that was my, like, a birthday, uh, gift for myself, and, uh, started this new company, um, called Nothing. It's been four and a half years. Uh, we underestimated the, the difficulty in building this, but we're still around, so very grateful to still have opportunities to, to build a company. Um, but it was a bit tougher than we expected.

Rahul Sharma 14:55 And what-

Nikhil Kamath 14:55 Are you branding your phone by keeping it there?

Carl Pei 14:58 Yeah. Some free exposure. [chuckles]

Nikhil Kamath 15:00 [chuckles] It has a very distinctive back, right?

Carl Pei 15:03 Yeah, so that's our entire

Carl Pei 15:05 thing. We-- It's a very, uh, mature industry-

Nikhil Kamath 15:10 Mm

Carl Pei 15:10 ... 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-

Rahul Sharma 16:05 Mm

Carl Pei 16:06 ... 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.

Nikhil Kamath 16:32 So for a company headquartered in Sweden-

Carl Pei 16:36 Uh, UK.

Nikhil Kamath 16:37 UK, the trade war will affect you how? Tariffs?

Carl Pei 16:42 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-

Rahul Sharma 16:57 Import

Carl Pei 16:58 ... 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.

Rahul Sharma 17:07 Yeah. This is, this is the first time... You know, every night, 10:00 PM, I go on cnn.com, see.

Nikhil Kamath 17:13 Yeah.

Rahul Sharma 17:14 He must have woken up, what is the new news? [chuckles] And then go to sleep. Yeah.

Nikhil Kamath 17:18 But it won't affect you as much if you're getting stuff from China and selling in India, right?

Rahul Sharma 17:23 No, it's not about, it's not about that, getting from... See, because the supply chain right now-

Nikhil Kamath 17:27 Mm

Rahul Sharma 17:27 ... is, is there in China, and then all the manufacturing now is coming to India.

Nikhil Kamath 17:31 Mm-hmm.

Rahul Sharma 17:32 But it's not about China, it's about India also-

Nikhil Kamath 17:35 Mm

Rahul Sharma 17:36 ... because reciproc- you know, reciprocal tariffs and all those sort of things are-

Nikhil Kamath 17:39 But I would assume it would hurt you most if you are selling something in the US.

Rahul Sharma 17:44 Certainly, yes. But it's in-- Now we're talking about the whole industry, you know, per se. So, uh-

Nikhil Kamath 17:48 Right

Rahul Sharma 17:49 ... 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%.

Nikhil Kamath 17:58 Mm.

Rahul Sharma 18:00 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...

Nikhil Kamath 18:10 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-

Carl Pei 18:32 Mm-hmm.

Nikhil Kamath 18:34 If I was buying something from them, I would assume the same duty should apply?

Carl Pei 18:40 Yeah, I think so.

Nikhil Kamath 18:42 Like, inherently, it's logical, no?

Rahul Sharma 18:43 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-

Nikhil Kamath 18:53 Mm.

Rahul Sharma 18:53 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-

Nikhil Kamath 19:02 Mm

Rahul Sharma 19:02 ... because they want to build their champions.

Nikhil Kamath 19:04 Mm. But then, how can they do that, but sell to other countries at the scale that they are selling and creating these deficits?

Rahul Sharma 19:15 No, but they created that scale.

Nikhil Kamath 19:16 Yeah.

Rahul Sharma 19:17 Right? So see, if you see examples how great countries are built, we have talked... It's, it's all about the companies that-

Nikhil Kamath 19:27 Mm

Rahul Sharma 19:27 ... you know. If you have great companies, the country will, you know, prosper. And same, you know, the United States is the biggest example.

Nikhil Kamath 19:33 Mm.

Rahul Sharma 19:35 Same thing, you know, China worked on that way back. And, uh, so if Mercedes-Benz have to, you know, they have- they wanna sell in there, they say, "Do a joint venture with our company." Everyone, Hyundai or Amazon, all of them in automobile.

Nikhil Kamath 19:52 Mm.

Rahul Sharma 19:52 Softwares, never allowed Google, Microsoft, you know, all those players. They build their own companies, and they... We, we, you know, we all know about that. So if it was like what we are discussing, that, yes, sitting across the table, "Okay, if you do this, I do this," then all these things, then Google would have been there probably, or Amazon would have been there. I don't think so, whether they will be having an Alibaba or not, or whether there was this Baidu, uh, you know, all those players would have been existing or not.

Nikhil Kamath 20:19 But I, I'm making the presumption that classical economic theory suggests that free markets are the fastest way to improve quality and get competitive. Like, I do see your point. I remember reading somewhere in history that back in the day when UK was not doing well, they shut off from the world, isolated their domestic industry, pre-industrial revolution, and they didn't allow foreign products for a while to help their internal industry to grow to a point where it can be competitive. So maybe there's a point to that. But when I look at it very simplistically, if Nikhil is selling something and Rahul is something, selling something, if each time Rahul is selling something, there is a certain additional tax outside of the cost of good produced in Rahul's margin, the same should apply to Nikhil as well.

Rahul Sharma 21:16 Certainly. So as I said, likewise, it, it sounds very... It seems simple.

Nikhil Kamath 21:20 Yeah.

Rahul Sharma 21:20 It's logical.

Nikhil Kamath 21:21 Yeah.

Rahul Sharma 21:21 But, uh, you know, when you're building your countries-

Nikhil Kamath 21:24 Yeah

Rahul Sharma 21:24 ... you know, the whole narrative changes in that, and that's, that's how all these FTA treaties have been worked out.

Nikhil Kamath 21:29 Yeah.

Rahul Sharma 21:30 Yeah.

Carl Pei 21:30 But they've supported their ecosystem also in a big way. If you look at all Chinese companies, I mean, all like, uh, you're talking about internet companies, they never allowed, uh, US companies to come in. In fact, there is no Uber also there. Amazon also had to se- sell out their business there. I mean, somehow they're protected for the Indian com- uh, Chinese companies to grow, actually.

Rahul Sharma 21:51 That's how, I mean, that's how the whole strategy, uh, you know, has been worked out. So today we talk about semiconductors here. That means they started working on semiconductors 20 years back.

Carl Pei 21:59 Yeah.

Rahul Sharma 21:59 And now the results are coming. There are, like, 3,200 companies working on semiconductors. Most patents have been filed there. So, um-

Nikhil Kamath 22:10 Carl, can I ask you another question?

Carl Pei 22:12 Mm-hmm.

Nikhil Kamath 22:13 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?

Carl Pei 22:25 I'm sure there's some, uh, childhood trauma, uh, but I've never explored that path to understand more.

Nikhil Kamath 22:30 What do you suspect it could be?

Carl Pei 22:32 I think just being, uh... not fitting in, the feeling of not fitting in, you know, like-

Nikhil Kamath 22:37 But you're a young, good-looking guy. Why not fitting in?

Carl Pei 22:40 'Cause I grew up in, uh, white societies as a minority.

Nikhil Kamath 22:44 Racist back then?

Carl Pei 22:46 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-

Nikhil Kamath 22:59 US more so or Sweden?

Carl Pei 23:01 I think, uh, both.

Nikhil Kamath 23:03 Is that all? Childhood?

Carl Pei 23:06 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-

Nikhil Kamath 23:29 This is at what age?

Carl Pei 23:30 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.

Nikhil Kamath 23:43 Mm-hmm.

Carl Pei 23:45 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.

Nikhil Kamath 23:54 Mm-hmm.

Carl Pei 23:54 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.

Nikhil Kamath 24:01 Mm-hmm.

Carl Pei 24:02 So that's also a, a driver, I think.

Nikhil Kamath 24:04 Do you feel like nothing has meaning? Are you nihilistic, stoic in your thinking?

Carl Pei 24:08 Uh, I think the journey has meaning, but, uh, I don't think there's much beyond death.

Nikhil Kamath 24:16 Well, thank you. Rahul, would you like to go next? Tell us about your

Nikhil Kamath 24:23 life. Start from the beginning, from Delhi.

Rahul Sharma 24:26 You know-

Nikhil Kamath 24:27 I know, but they don't know. [chuckles]

Rahul Sharma 24:32 ... 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.

Nikhil Kamath 25:11 Mm-hmm.

Rahul Sharma 25:13 And I was pretty clear that I will not work for anybody else-

Nikhil Kamath 25:15 Mm.

Rahul Sharma 25:16 -despite knowing that there is no capital. So-

Nikhil Kamath 25:19 Why?

Rahul Sharma 25:20 No, as a, as a schoolteacher, how much capital do you really have?

Nikhil Kamath 25:23 No, why will you not work for anyone else?

Rahul Sharma 25:27 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-

Nikhil Kamath 25:42 You have said this to me in person, like personally, at different points.

Rahul Sharma 25:46 Mm.

Nikhil Kamath 25:47 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?

Rahul Sharma 26:13 Yeah. So I think we'll be, uh, break up in these-

Nikhil Kamath 26:15 Yeah

Rahul Sharma 26:15 ... 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-

Nikhil Kamath 26:29 See coffee there?

Speaker 26:30 Yes.

Rahul Sharma 26:31 I remember this conversation with my friends at that time, and-

Nikhil Kamath 26:33 Mm-hmm

Rahul Sharma 26:33 ... 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.

Nikhil Kamath 26:54 Why?

Rahul Sharma 26:57 ... "..." [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.

Nikhil Kamath 27:23 So you're fifty now. Your formative years were nineties? When India was opening up.

Rahul Sharma 27:32 Yeah. In, in, you know, end of, uh, yeah, let's say, you can say when I started working, it was 2000. Yeah.

Nikhil Kamath 27:40 Right. What did you see then, which made you want to do these things?

Rahul Sharma 27:44 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."

Nikhil Kamath 28:03 Mm-hmm.

Rahul Sharma 28:05 And, uh, bought that computer. And I clearly remember when I bought that computer, I had no idea about computers at that time. Windows came, and, you know, Windows was there at that. So I went to the guy who was selling the computer. He said, "What computer do you want?" I said, "It should have a lot of icons on the screen." [chuckles]

Nikhil Kamath 28:26 [chuckles]

Rahul Sharma 28:26 Used to have shortcuts, actually.

Nikhil Kamath 28:28 Mm.

Rahul Sharma 28:28 I never knew about that.

Nikhil Kamath 28:29 Yeah.

Rahul Sharma 28:29 I said, "It used-- It should have a lot of icons on the screen."

Nikhil Kamath 28:33 Mm.

Rahul Sharma 28:34 And that's how... So he laughed at me.

Nikhil Kamath 28:37 Mm.

Rahul Sharma 28:38 "...," he gave me, and then I bought a book. There was Learn VB in Twenty-One Days.

Nikhil Kamath 28:49 Visual Basic.

Rahul Sharma 28:50 Visual Basic, yeah. I wrote program in three days, "Hello, world," this, that. I thought, "Okay, I know programming now." My friend came, he saw the book, he said, "Uh, you've done this?" I said, "Yeah, I made a program." He said, "Can I take this?" I said, "Yeah, take it."

Nikhil Kamath 29:03 Mm.

Rahul Sharma 29:04 So he took that book away. That guy be- later became my partner. So I... The story, and he's a core techie guy.

Nikhil Kamath 29:10 Mm.

Rahul Sharma 29:11 Coding only.

Nikhil Kamath 29:11 Mm.

Rahul Sharma 29:12 So I tell him, "You become a coder because of me."

Nikhil Kamath 29:14 Mm.

Rahul Sharma 29:14 [clears throat] So by virtue of that, buying that computer, that decision, we started working on, uh... So I started looking for opportunities in software-

Nikhil Kamath 29:22 Mm.

Rahul Sharma 29:23 -that what can I do in software?

Nikhil Kamath 29:25 2000 was, like, the software bust time, no?

Rahul Sharma 29:28 Yeah, the dot-com.

Nikhil Kamath 29:29 Mm.

Rahul Sharma 29:29 So this is, like, '99

Rahul Sharma 29:30 or so.

Nikhil Kamath 29:31 Uh, you started Micromax in 2000?

Rahul Sharma 29:33 No, ninety... I think 1998.

Nikhil Kamath 29:36 1998. With the three friends?

Rahul Sharma 29:39 Four friends.

Nikhil Kamath 29:39 Four friends.

Rahul Sharma 29:40 Four friends.

Nikhil Kamath 29:40 Mm.

Rahul Sharma 29:41 Started with three, fourth came from US and then joined, yeah.

Nikhil Kamath 29:43 Mm.

Rahul Sharma 29:44 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-

Nikhil Kamath 30:09 Mm

Rahul Sharma 30:09 ... and doing all that. So it, you know, that was time when Sun Microsystems was there, and-

Nikhil Kamath 30:16 Yeah

Rahul Sharma 30:16 ... 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.

Nikhil Kamath 30:29 Mm-hmm.

Rahul Sharma 30:30 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."

Nikhil Kamath 31:51 Mm-hmm.

Rahul Sharma 31:53 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-

Nikhil Kamath 32:35 Mm-hmm.

Rahul Sharma 32:35 -laying down the wire now.

Nikhil Kamath 32:37 You mean the STD center?

Rahul Sharma 32:39 STD center. STD booths.

Nikhil Kamath 32:41 Hmm.

Rahul Sharma 32:42 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-

Nikhil Kamath 32:51 Mm-hmm

Rahul Sharma 32:52 ... 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-

Nikhil Kamath 33:23 Hmm

Rahul Sharma 33:24 ... 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.

Nikhil Kamath 33:40 What year was this?

Rahul Sharma 33:42 It's, I think, two thousand and three.

Nikhil Kamath 33:44 Hmm. Hundred crore then is like thousand crore now. Correct.

Rahul Sharma 33:47 Yes.

Nikhil Kamath 33:48 More. Hmm. In fact, more. Hmm.

Rahul Sharma 33:51 So we were happy. We thought that, okay, we have arrived, something is happening. So that business was doing well. So one day, I got a call from this Finnish guy.

Nikhil Kamath 33:59 Hmm.

Rahul Sharma 34:00 I remember his name, Henry. So Henry said, "Rahul, can we meet?" I said, "Absolutely." He said, "Why?" He said, "I have a good news and bad news for you." I said, "Tell me over phone." He said, "No, come over my home." "Okay." Went to his home, said, "Which would you like to listen?" I said, "Tell me the bad news first." He said, "Bad news is that as, uh, Nokia, we have sold the whole machine-to-machine business."

Nikhil Kamath 34:25 What year was this?

Rahul Sharma 34:26 It's two thousand and three. Two thousand and three, two thousand and four.

Nikhil Kamath 34:30 Back then, they were killing it, right? Nokia was the market leader.

Rahul Sharma 34:33 Like, number one to number ten was Nokia.

Nikhil Kamath 34:35 Yeah.

Rahul Sharma 34:35 Then started eleven, twelve, thirteen.

Nikhil Kamath 34:37 Yeah.

Rahul Sharma 34:38 Yeah. So I said, "What is, uh, good news?" He said, "Good news is that as Nokia, now we are coming into car accessories business."

Nikhil Kamath 34:44 Mm-hmm.

Rahul Sharma 34:45 "We want you to distribute our car accessories."

Nikhil Kamath 34:48 Hmm.

Rahul Sharma 34:50 So those car accessories, you know, they had speakers you could put in the, those, uh, that, that, that lighter socket.

Nikhil Kamath 34:57 Yeah. Mm-hmm. Oh. Mm-hmm.

Rahul Sharma 34:58 And connect the wire with your Nokia phone, and then while you're driving, the speaker, you know, you can talk. A pretty interesting solution. They had speaker you can put in your seat, and the mic and s- you know, the speakers will come like this. So all those sort of, uh... So I said, "No, we're not interested in the accessories business." So the technology was there with us completely because we developed, uh... So we made our own box, our fixed wireless terminal. We went, stamped Micromax on top of it, and went back to Airtel, and we said, uh, "Nokia is no more. This is Micromax. Would you like to use it? It's the same terminal, but" All of those guys, Airtel and Vodafone, they used to know me from Nokia. In their phone also, it, their, my phone number was saved as Rahul Nokia. So-

Nikhil Kamath 35:50 [chuckles]

Rahul Sharma 35:50 -they said, "Okay," Um, up in north, there is a shrine, Vaishno Devi. They said, "You install it there," because, because it works twenty-four hours, the payphone-

Nikhil Kamath 36:00 Mm.

Rahul Sharma 36:00 -the, you know, the... It works twenty-four hours. He said, "If it works there-

Nikhil Kamath 36:04 Vaishno Devi?

Rahul Sharma 36:04 Vaishno Devi.

Nikhil Kamath 36:05 Yeah, I've been there. That walk where you-

Rahul Sharma 36:08 Yes.

Nikhil Kamath 36:09 -you're climbing the hill, and there are-

Rahul Sharma 36:10 Yes

Nikhil Kamath 36:10 ... STD booths on that path, right?

Rahul Sharma 36:11 Yes.

Nikhil Kamath 36:12 Hmm.

Rahul Sharma 36:14 So, uh, we installed our machines there.

Nikhil Kamath 36:17 First machines in Vaishno Devi?

Rahul Sharma 36:18 Yes.

Nikhil Kamath 36:19 How come?

Rahul Sharma 36:20 Because that's what Airtel said, that, you know, if you install there-

Nikhil Kamath 36:22 Mm

Rahul Sharma 36:22 ... because the traffic is so high-

Nikhil Kamath 36:24 Uh

Rahul Sharma 36:24 ... that it, if it works there, it can take the load-

Nikhil Kamath 36:27 Uh

Rahul Sharma 36:27 ... then it will work anywhere.

Nikhil Kamath 36:29 Hmm.

Rahul Sharma 36:29 We said, "Okay." We installed it there twenty days. The revenue from... Because, see, for, for the operators, it was a killer product because their ARPU from one SIM card, multiple people are using one SIM card.

Nikhil Kamath 36:40 Mm.

Rahul Sharma 36:40 The ARPU is massive. Thousands of rupees from one SIM card, basically with an individual, it's-

Nikhil Kamath 36:45 Versus what did they have before that?

Rahul Sharma 36:47 Nothing.

Nikhil Kamath 36:49 ... there were STD booths before that, right?

Rahul Sharma 36:51 MTNL, powered by MTNL and BSNL.

Nikhil Kamath 36:53 Mm.

Rahul Sharma 36:54 To run an, to, you know, to install an STD booth where there was no MTNL, BSNL line, where there was only, if there was a GSM signal coming in, you can power that.

Nikhil Kamath 37:02 Mm.

Rahul Sharma 37:02 And so then they gave us a contract.

Nikhil Kamath 37:05 This is, this is pre-people having cell phones, right? Significantly pre.

Rahul Sharma 37:10 Oh, cell phones were there at that time.

Carl Pei 37:11 Two thousand five, six, they were pretty much-

Nikhil Kamath 37:14 Yeah?

Rahul Sharma 37:14 Yeah, the cell phones were there. No smartphones, all the feature phones were there.

Carl Pei 37:17 Mm.

Rahul Sharma 37:18 That's what we-

Nikhil Kamath 37:18 So you're saying the difference was it got cheaper?

Rahul Sharma 37:20 A, it... Yeah, it was difficult to get, and so you have to apply to MTNL, get a license, and then, you know, install.

Nikhil Kamath 37:26 Painful that time.

Carl Pei 37:27 Mm.

Rahul Sharma 37:28 Right. And then-

Nikhil Kamath 37:28 The government.

Rahul Sharma 37:29 The government thing, and then, uh, uh, you know, they will come, a- and if there was no line, eh-

Nikhil Kamath 37:34 Line-

Rahul Sharma 37:34 Imagine if there is no... If it is a village-

Nikhil Kamath 37:37 Mm

Rahul Sharma 37:37 ... they have to lay down the whole line. It was a costly affair and time-taking.

Nikhil Kamath 37:40 Mm.

Rahul Sharma 37:41 And for us, if there's a signal is coming, we will say, "Yeah, what, five minutes?" Say, "We'll install it." So that business started doing quite well, and then we became a de facto number one on GSM fixed wireless terminal phones in India.

Nikhil Kamath 37:53 Mm.

Rahul Sharma 37:53 And, uh, s- started operating offices pan-India-

Nikhil Kamath 37:57 Mm

Rahul Sharma 37:57 ... became a pan-India player, service network, and everything. We, so we learned a lot there-

Nikhil Kamath 38:01 Mm

Rahul Sharma 38:02 ... applying, you know, sale tax numbers and everything. You know, like the whole, how the business works.

Nikhil Kamath 38:08 This is till two thousand and six?

Rahul Sharma 38:10 Two thousand, yeah, two thousand and six, seven.

Nikhil Kamath 38:14 Mm.

Rahul Sharma 38:15 One fine day, I got a call from a senior guy from Airtel. He said, "Rahul, there's a problem in a machine. Can you go and check it?" I... That, by that time, you know, our business grew to, like, four hundred

Rahul Sharma 38:23 crores per annum.

Nikhil Kamath 38:24 Mm.

Rahul Sharma 38:25 So we were doing... We, like-

Nikhil Kamath 38:29 Did you have liquidity? Did you take out money from the business?

Rahul Sharma 38:31 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-

Nikhil Kamath 38:37 Mm

Rahul Sharma 38:38 ... and thought, "Ah, but this is it."

Nikhil Kamath 38:39 In two thousand and six?

Rahul Sharma 38:40 Ha, so that time, then my... That was the first time when my parents realized that our son is doing something-

Nikhil Kamath 38:46 Mm

Rahul Sharma 38:46 ... because otherwise-

Nikhil Kamath 38:47 Yeah

Rahul Sharma 38:47 ... 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?"

Nikhil Kamath 38:59 Mm.

Rahul Sharma 39:00 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-

Nikhil Kamath 39:20 Mm-hmm

Rahul Sharma 39:20 ... 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."

Nikhil Kamath 39:54 Mm.

Rahul Sharma 39:54 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?

Nikhil Kamath 40:04 Mm.

Rahul Sharma 40:05 He showed me a big twenty dB gain antenna mounted on a pole on his terrace. Typical Indian jugaad.

Nikhil Kamath 40:12 Mm.

Rahul Sharma 40:13 He said, "Sir, "Yeah, signal comes from here."

Nikhil Kamath 40:15 Mm.

Rahul Sharma 40:16 I got more intrigued. I said, "Fine, there's no electricity. How do you charge the battery?"

Nikhil Kamath 40:20 Mm.

Rahul Sharma 40:21 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-

Nikhil Kamath 40:52 Mm

Rahul Sharma 40:52 ... because at those days, there were different pins for different phones.

Nikhil Kamath 40:55 I remember, yeah.

Rahul Sharma 40:57 Different for Motorola-

Nikhil Kamath 40:58 Mm

Rahul Sharma 40:58 ... and different for Nokia.

Nikhil Kamath 41:00 Mm.

Rahul Sharma 41:00 Those round pins and all-

Nikhil Kamath 41:01 Yeah

Rahul Sharma 41:01 ... before everything standardized. I said, "Why is this?" He said, "Because there's no electricity at home. People come, pay, and charge."

Carl Pei 41:08 It's very expensive, right? For a charge.

Nikhil Kamath 41:11 Yeah.

Rahul Sharma 41:12 Yeah.

Nikhil Kamath 41:12 That time it is very much.

Rahul Sharma 41:13 Yeah. But see, those days, mobile phones were not common like this-

Carl Pei 41:16 Mm

Rahul Sharma 41:16 ... because it was, the call was not, uh, free. Today, probably you're paying for data. You know, that time, the call was expensive.

Carl Pei 41:24 Mm.

Rahul Sharma 41:24 I went back, sat with our guys, worked a lot on, on the GSM technology. I said, "Guys, why don't we make a mobile phone?"

Nikhil Kamath 41:31 What year was this?

Rahul Sharma 41:33 This is two thousand and seven.

Nikhil Kamath 41:34 Mm.

Rahul Sharma 41:35 So the first reaction from everyone internally was, "Are you crazy? Who's going to fight these Nokias and, and Samsungs and Motorolas in the world?"

Nikhil Kamath 41:44 Mm.

Rahul Sharma 41:47 And he said, "Why do you want to do that?

Nikhil Kamath 41:49 Mm.

Rahul Sharma 41:49 We are doing so well. You're driving a BMW 3 Series, so, you know, why do you want to disturb the apple cart?

Nikhil Kamath 41:55 Mm.

Rahul Sharma 41:55 Why?" I said, "No, I think, uh, you know, the food is being cooked in different countries. We need a flavor in India. You know, it's somewhere in Finland or in Korea, or... But we need Indian flavor in this." Anyway, so fought a lot internally.

Nikhil Kamath 42:15 Mm.

Rahul Sharma 42:16 And then they said, um-

Nikhil Kamath 42:17 Fought with your co-founders and partners.

Rahul Sharma 42:18 Yes, yes, yes, that. They said, "Okay, ten thousand phones you make. If it works, it's fine. Otherwise, our business is doing well, so..."

Nikhil Kamath 42:26 Mm.

Rahul Sharma 42:26 So it's like casino money they gave me. They said, "You go and play. If it works, it's okay-

Nikhil Kamath 42:29 Mm

Rahul Sharma 42:29 ... otherwise, you play."

Nikhil Kamath 42:30 How much money was it?

Rahul Sharma 42:32 Ten thousand phones, uh, even if a phone was two thousand rupees, you multiply, it was what?

Nikhil Kamath 42:38 Twenty crores?

Rahul Sharma 42:39 Yeah, around that, yeah. I said, "Okay." So we sat with team and said, "Guys, let's make a phone with long battery life, one month of battery backup," because of all these experiences. And, uh-... That's how the first Micromax phone came, and the tagline for the phone was Mobile Kebab, because the standby time was thirty days. Since we worked a lot, see the, now, here in my, you know, my philosophy is that ev- whatever you're doing in life, nothing goes waste.

Nikhil Kamath 43:11 Mm.

Rahul Sharma 43:11 Whatever we was, you know, I'm just, you know, scramming my whole story here, but in between, we worked a lot on SIM card with Schlumberger and all those guys for one, two years. Nothing came out of it.

Nikhil Kamath 43:20 Mm.

Rahul Sharma 43:21 Nothing came out of all those things. But all those things we implemented when we were making phones. So, uh, normal phones take seven to eight milliamperes, you know, per second as power. We, we worked on embedded, you know, made it two to three milliamperes per second, and, uh, that's how we created the same, same form factor.

Nikhil Kamath 43:39 Mm.

Rahul Sharma 43:40 At that time, the, the battery was seven hundred, six hundred mAh.

Nikhil Kamath 43:44 Mm.

Rahul Sharma 43:44 We put some eighteen hundred mAh, two thousand mAh that time, and same form factor. Made a phone and then went to the distributors. Now, the real problem started from there, because all the distributors were, like, all big distributors.

Nikhil Kamath 43:59 Mm.

Rahul Sharma 43:59 Like, even the Delhi distributor of Nokia was bigger than us. We were doing pan-India business, fixed wireless and all, but because Nokia was so successful. So we said, "Well, now we make mobile phones. Why don't you distribute?" And globally, it was only, you know, all those four, five international brand names. There was no local brand doing anything in the world at that time.

Nikhil Kamath 44:22 Mm.

Rahul Sharma 44:22 Or even if it was there, they were not, like, very, very successful brands. So they just offered us a cup of coffee and said, "Good friends, but sorry."

Nikhil Kamath 44:31 Mm.

Rahul Sharma 44:32 We were not able to find a distributor after making the phone.

Nikhil Kamath 44:35 In 2000?

Rahul Sharma 44:36 'Seven, eight.

Nikhil Kamath 44:38 Mm.

Rahul Sharma 44:39 Eight now. This is eight.

Nikhil Kamath 44:40 Mm.

Rahul Sharma 44:42 And, uh, so we went back to... After a lot of, we then say, "Well, there's no distributor. How do we...?"

Nikhil Kamath 44:47 Mm.

Rahul Sharma 44:47 So we went back to our fixed wireless.

Carl Pei 44:49 Did you already make the inventory?

Rahul Sharma 44:51 Huh?

Carl Pei 44:51 Did you already pay for the inventory?

Rahul Sharma 44:52 Yeah, yeah, yeah, already it was with us.

Nikhil Kamath 44:54 Mm.

Rahul Sharma 44:55 And, uh, we went back to our distributors of fixed wireless terminals, payphone guys, who were selling payphones. We said, "Now, we have this. Would you like to sell this?" They said, "Sir, "... if it sells, we will see." Because they were not the mobile phone guys. We gave the phones to them. Ten days, the phones were sold out.

Nikhil Kamath 45:18 Mm.

Rahul Sharma 45:19 Why? Because of the differentiator. There was nothing like that in the market.

Nikhil Kamath 45:22 Battery was their differentiator-

Rahul Sharma 45:24 Yes.

Nikhil Kamath 45:25 -which you learned from traveling to remote places.

Rahul Sharma 45:27 Yes. So, and the form factor was nice. It was not bulky or... So we didn't try to change-

Nikhil Kamath 45:34 Mm

Rahul Sharma 45:35 ... much on the form factor and all. The, the repeat order started coming in.

Nikhil Kamath 45:40 Mm.

Rahul Sharma 45:41 That's the signal-

Nikhil Kamath 45:41 And then everything went crazy. Things blew up, right?

Rahul Sharma 45:44 It blew up and then-

Nikhil Kamath 45:44 I remember seeing Micromax everywhere.

Rahul Sharma 45:47 Yeah, then things became crazy.

Nikhil Kamath 45:48 And you started marketing like mad at this point, right?

Rahul Sharma 45:52 No, so we, then we, then we sat and said, "Okay, what is it that we want to do?

Nikhil Kamath 45:56 Yes.

Rahul Sharma 45:56 "And how we want to do?" Because, uh, there could be a lot of distractions. So- And we were still learning at that stage. It's not that we perfected, we were still learning. So one day, I saw my cook using three SIM cards.

Nikhil Kamath 46:11 Mm.

Rahul Sharma 46:12 This is, uh, the time when all the new operators got license-

Nikhil Kamath 46:15 Mm

Rahul Sharma 46:16 ... and everybody was selling new schemes every day. Uninor and-

Carl Pei 46:19 Yeah.

Rahul Sharma 46:19 -other new guys came in. So I said, "Why are you using three SIM cards?" He said, "Sir, one for local calling, local calling." I said, "Fine." I said, "Second SIM card?"

Nikhil Kamath 46:26 Mm.

Rahul Sharma 46:27 He said, "To call my native village."

Nikhil Kamath 46:29 Mm.

Rahul Sharma 46:29 I said, "Third SIM card?"

Nikhil Kamath 46:30 Mm.

Rahul Sharma 46:31 He said, "Incoming is free, so I'm not throwing it away."

Nikhil Kamath 46:33 Mm.

Rahul Sharma 46:36 I went back to our guys and said, "Guys, why don't we make a phone with a dual SIM card?"

Nikhil Kamath 46:40 Mm.

Rahul Sharma 46:41 They said, "No, uh, two phones, only rich people can afford." I said, "That's not the consumer truth. These are the guys who are using two phones."

Nikhil Kamath 46:49 Mm.

Rahul Sharma 46:49 "So can we make in a single phone, you know, simultaneously talking-

Nikhil Kamath 46:53 Mm

Rahul Sharma 46:53 ... on the GSM signal?" So with one single baseband, we created the dual SIM phone that time. And I still remember, uh, I showcased it to our, one distributor meet, and everybody stood and clapped, and they said, "Sir..." That was the time when we realized that we have to, uh, find the gaps in the market.

Nikhil Kamath 47:14 It's very interesting. You're finding your gaps from your driver, your maid, from going to villages.

Rahul Sharma 47:20 Everyday life-

Nikhil Kamath 47:21 Mm

Rahul Sharma 47:21 ... is like you're learning that, you're just observing and then, you know, finding those gaps.

Nikhil Kamath 47:26 Mm. Do you see any gaps today?

Rahul Sharma 47:28 Multiple.

Nikhil Kamath 47:29 Name one, top of the list.

Rahul Sharma 47:34 No, I can go on and on and on.

Nikhil Kamath 47:35 One.

Rahul Sharma 47:35 But these are all different, different ideas.

Nikhil Kamath 47:38 Mm.

Rahul Sharma 47:38 I went crazy, I will tell you, you know, in that, in terms of finding gaps. So we said, "Okay, we want to make a..." So that's how we made first phone for girls with Swarovski. At that time, the, the phones for girls in India was only by Dolce & Gabbana, by Motorola. Now, how many people can afford a Dolce & Gabbana in this country?

Nikhil Kamath 47:53 Mm.

Rahul Sharma 47:54 So we made a, we made a phone, uh, you know, with Swarovski. Now, again, there's very interesting consumer stories here.

Nikhil Kamath 47:59 Mm.

Rahul Sharma 48:00 We launched that phone because our team insisted, "No, this is Swarovski.

Nikhil Kamath 48:04 Mm.

Rahul Sharma 48:04 It has to be expensive." And, uh, after a lot of... I said, "No, just make it in, in a, in the reach of, let's say, common people." We priced at five thousand rupees at that time.

Nikhil Kamath 48:18 Mm-hmm. Is that the way in India? I remember watching a interview of yours when I was researching for today. When you were talking about the form factor on your phone, you said, what was his name? Jesper?

Rahul Sharma 48:31 Mm. Yeah.

Nikhil Kamath 48:32 He said that whenever you look a product, at a product for two seconds and look away, and you have to draw it-

Rahul Sharma 48:38 Mm-hmm

Nikhil Kamath 48:38 ... you should have that one distinctive design element. That's a very different school of thought from the more utilitarian school of thought here, right? Is this what works for India, and that works for the affluent?

Rahul Sharma 48:55 ... No, see, this is a time when there were only feature phones, there were no smartphones.

Nikhil Kamath 48:58 Right.

Rahul Sharma 48:58 So how do you differentiate feature phones?

Nikhil Kamath 49:00 Right.

Carl Pei 49:01 I think we're at a stage in the industry where it's hyper-competitive.

Rahul Sharma 49:04 Yes.

Carl Pei 49:05 Every user need has been-

Rahul Sharma 49:07 Yes

Carl Pei 49:08 ... fully absorbed.

Rahul Sharma 49:08 Now it is all evolved. Like in laptops-

Nikhil Kamath 49:11 Mm

Rahul Sharma 49:11 ... it's already at the ceiling.

Nikhil Kamath 49:12 Mm.

Rahul Sharma 49:12 You know, how will you... You can't reinvent.

Nikhil Kamath 49:14 Right.

Rahul Sharma 49:16 This was a time when it, everything was evolving.

Nikhil Kamath 49:18 Right.

Carl Pei 49:19 We're at a different maturity stage-

Rahul Sharma 49:20 Yes

Carl Pei 49:20 ... of the industry, I think.

Rahul Sharma 49:21 Yes.

Nikhil Kamath 49:21 Right. Right.

Rahul Sharma 49:23 Want to make phones-

Nikhil Kamath 49:24 But then was, was also a dream when you, uh, came in. Nobody had phones that time. 2008, by then, a lot of people had phones.

Rahul Sharma 49:31 Yeah, but the penetration was not high, because, you know-

Nikhil Kamath 49:33 Mm

Rahul Sharma 49:33 ... the GSM rates and everything was quite expensive.

Nikhil Kamath 49:36 Was high. Mm. How big did it get in terms of numbers?

Rahul Sharma 49:39 From selling 10,000 phones a month, uh, a month, we were selling three million phones a month.

Carl Pei 49:47 How, how big was the overall market at that time?

Rahul Sharma 49:49 Total market, less than 100 million in-

Carl Pei 49:51 Mm-hmm

Rahul Sharma 49:51 ... in India, put together. Less than that.

Nikhil Kamath 49:54 So you were selling 3% of the total market a month?

Rahul Sharma 49:58 No, no, no.

Carl Pei 49:59 There were 20... Uh, you, you would have-

Rahul Sharma 50:01 No, no, no, no, no, no

Carl Pei 50:01 ... a large share.

Rahul Sharma 50:01 So-

Carl Pei 50:02 A third.

Rahul Sharma 50:02 No, no, no.

Carl Pei 50:03 Yeah.

Rahul Sharma 50:03 So our... When, you know, we were, when we were doing, uh, three million, at that time our market share was around 25%-

Carl Pei 50:08 Wow!

Rahul Sharma 50:10 ... five percent plus, plus.

Nikhil Kamath 50:11 That's crazy, right? You were sponsoring cricket, you were sponsoring everything back then, right?

Rahul Sharma 50:17 Yes, so our big bet was on cricket-

Nikhil Kamath 50:19 Mm

Rahul Sharma 50:19 ... and music.

Nikhil Kamath 50:20 Mm.

Rahul Sharma 50:21 Because that's what the youth was into, and, uh, we said-

Nikhil Kamath 50:25 Mm

Rahul Sharma 50:25 ... a blanket on, you know, whatever is, uh... Yeah.

Nikhil Kamath 50:27 Yeah.

Rahul Sharma 50:27 So, and that worked also.

Nikhil Kamath 50:29 And this stayed for a while?

Rahul Sharma 50:31 Yeah.

Nikhil Kamath 50:32 For a couple of years, this crazy growth trajectory?

Rahul Sharma 50:36 Yes.

Nikhil Kamath 50:37 Interestingly, we come back to our tariff questions, the tariff conversation we were having earlier, because that kind of was the problem, right? The Chinese

Nikhil Kamath 50:47 competition, which came into India post.

Rahul Sharma 50:49 Yes, so, so that was a time... And again, yeah, I will answer a couple of other questions which you were asking about-

Nikhil Kamath 50:55 Yeah, yeah

Rahul Sharma 50:55 ... you know, why you wanted to-

Nikhil Kamath 50:56 Yeah

Rahul Sharma 50:56 ... and all. So there were a lot of learnings also in between.

Nikhil Kamath 51:00 Mm.

Rahul Sharma 51:00 Uh, so for example, you know, when Meizu was raising the round, uh, with Alibaba-

Carl Pei 51:04 Mm-hmm

Rahul Sharma 51:04 ... we were deep down with Alibaba that time. Yeah, raising the round and, uh-

Carl Pei 51:08 So our paths have been, uh, intertwined.

Rahul Sharma 51:10 Yes, and a pretty big one. At that time, we were raising, what, around eight, $800 million round at that time.

Nikhil Kamath 51:16 This is in 2000?

Rahul Sharma 51:17 14, and, uh, secondary-

Nikhil Kamath 51:20 Mm

Rahul Sharma 51:20 ... most of it.

Nikhil Kamath 51:21 Wow. [laughing]

Carl Pei 51:22 Because the business was so... [laughing]

Rahul Sharma 51:24 Yeah. So, uh, it was, uh, because the, the business was throwing so much of cash.

Nikhil Kamath 51:28 Right.

Rahul Sharma 51:28 Yeah, so we said, "We don't need money," but, uh, you know, at that time, everybody wanted to connect it.

Nikhil Kamath 51:33 Yeah.

Rahul Sharma 51:33 You know, I remember-

Nikhil Kamath 51:33 You could buy a few more BMWs. Few more than few more. [laughing]

Carl Pei 51:40 Few more, yeah. [laughing]

Rahul Sharma 51:40 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..."

Nikhil Kamath 51:50 Bad decision in hindsight?

Rahul Sharma 51:52 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-

Nikhil Kamath 52:14 Mm

Rahul Sharma 52:14 ... let's, we'll go head-on." But, you know, that was a very, very different game-

Nikhil Kamath 52:22 Mm

Rahul Sharma 52:22 ... because it, you know, when the, when the Chinese came, they came with so much of gunpowder, and you never know that where the gunpowder is coming from and whether there is an end to it or not.

Nikhil Kamath 52:31 Mm-hmm. Do you think the government subsidized them to come in that manner?

Rahul Sharma 52:35 So-

Nikhil Kamath 52:36 Their government.

Rahul Sharma 52:37 Yes. So their... So, as I said, we never know, because, you know, there were so many schemes, uh, which were running there, and not only the central-level scheme, but also the state-level scheme. The companies were funded by the states also.

Nikhil Kamath 52:46 Mm.

Rahul Sharma 52:48 So we said, "Okay, we'll, we'll, we'll see," and then we started fighting.

Nikhil Kamath 52:53 Mm.

Rahul Sharma 52:53 It was a price-

Nikhil Kamath 52:55 Mm

Rahul Sharma 52:55 ... you know, price battle started going on, you know, when the Xiaomis of the world-

Nikhil Kamath 52:58 Mm

Rahul Sharma 52:58 ... started coming in, and then the-

Nikhil Kamath 53:00 Mm.

Rahul Sharma 53:00 So before that, we were fighting, let's say, with the Samsungs and the Motos or the Sony Ericsons of the world, or, um, doing pretty well. And then you start to- suddenly you start having a competition wherein if you're selling, let's say, at 100 rupees, somebody comes and say, "Hey, I'm 90 rupees."

Nikhil Kamath 53:20 Mm. And if you say 80, they'll say 70.

Rahul Sharma 53:22 They'll say 70. So that's how... So it's race to the bottom, and then suddenly there's... They were burning a lot of money.

Nikhil Kamath 53:29 But can I ask a structural question?

Rahul Sharma 53:31 Yes. Yes.

Nikhil Kamath 53:32 While it seems like a race to the bottom, because of the scale of manufacturing they have-

Rahul Sharma 53:39 Yes

Nikhil Kamath 53:39 ... is the cost of production in China inherently so much lower that at 80 rupees you can't make money, but at 70 rupees they can?

Rahul Sharma 53:49 So that's, uh, yeah, that's true, because it's, it's the whole supply chain, which is, you know, which is established there.

Nikhil Kamath 53:55 Mm.

Rahul Sharma 53:56 So, uh, probably what we were discussing there.

Carl Pei 53:58 Mm-hmm.

Rahul Sharma 53:59 If their BOM is 100, your BOM is 120.

Carl Pei 54:03 But you would also be importing that time for manufacturing?

Rahul Sharma 54:06 No, so, uh, see, we established our first plant in India in 2010.

Carl Pei 54:11 So you started early.

Rahul Sharma 54:12 Way before Make in India started. So benefa- but the components was coming from there.

Carl Pei 54:16 Yeah.

Rahul Sharma 54:17 Right? And at that time, all these brands, what we see right now, they were not there. So they, they started coming in. For example, all the brands were there in DVD players or-

Carl Pei 54:28 Yeah

Rahul Sharma 54:28 ... MP3 players-

Carl Pei 54:29 Mm

Rahul Sharma 54:29 ... and then they started coming out there. And then the price war started.

Nikhil Kamath 54:33 Mm.

Rahul Sharma 54:33 And, uh, so- and we also went into it. But somehow, with the whole supply chain and everything, then you slowly, you start, you know, access to all these things started getting restricted. So, for example, why Micromax became successful?

Nikhil Kamath 54:49 Mm.

Rahul Sharma 54:50 Because in this, in the industry where we are in, you are already, you know, you're looking for a differentiation. For example, if I was designing a phone, my question to myself was, was that, "Why will I buy or somebody will buy this phone? What is different in this phone? Why?

Nikhil Kamath 55:00 Mm.

Rahul Sharma 55:01 Why?... somebody will not buy another phone. So I, I ne- I, you know, that's how the differentiators were coming in. And differentiator was not only on, on the feature, but also on who's going to come up with the latest chipset first? Who's going to come up with... There is a 50-megapixel camera, who's the first guy coming up with the 50-megapixel camera?

Nikhil Kamath 55:17 Mm-hmm.

Rahul Sharma 55:18 If there was a fast charging coming, who's the first guy to come up with fast charging? And the distributors used to look at, you know, look, look at us that, "Okay, they will come up with something new every quarter", and... So when that s- access started getting stopped, when you are not getting-

Nikhil Kamath 55:33 Government stopped the access?

Rahul Sharma 55:33 No, no, it's not the government, you know, because the scale shifted somewhere else, right? And then-

Nikhil Kamath 55:39 And they preferred supplying to their own companies than to you?

Rahul Sharma 55:43 Right. And, uh, so the num- and the numbers and everything, because their numbers started growing up in- because China, it itself became a very big market, and the scale was, you know, became big. Because, you know, there are a lot of theories about, about Micromax in the market. This happened, that happened. I mean, everybody can come up with their own.

Nikhil Kamath 56:00 Yeah. What is the theory, the most popular one?

Rahul Sharma 56:03 No, I keep on hearing different one. "Oh, they went, uh, uh, you know, into luxury segment-

Nikhil Kamath 56:07 Mm.

Rahul Sharma 56:07 ... or they, there was no R&D."

Nikhil Kamath 56:10 Mm.

Rahul Sharma 56:10 You know, all this. But I don't know how many people know, we- when Nokia got sold, we had the lar- we, you know, we took all the top Nokia, they had the gold-

Nikhil Kamath 56:19 Yeah

Rahul Sharma 56:19 ... you know, division. We got all gold guys from Nokia and doing the R&D at that time. But whatever this was happening, all this, you know, coming from China, it was a global phenomena.

Nikhil Kamath 56:28 Mm.

Rahul Sharma 56:28 So it was not only that we were affected. All the other, let's say, there were other brands in, in Turkey or in, um, in, in Malaysia, other places, you know, everybody got affected. And I think in 2019, odd or so, we realized that, um, you know, you can, you can burn money, but you, you know, you can burn money till the point you know that I'm gonna win the game.

Nikhil Kamath 56:51 Mm.

Rahul Sharma 56:52 Right? But if the other person is having an unlimited supplies, like a bottomless pit-

Nikhil Kamath 56:59 A bit like today, no? All the loss-making startups in India-

Rahul Sharma 57:02 Mm

Nikhil Kamath 57:03 ... all competing downwards.

Rahul Sharma 57:05 Yeah. And see, and, uh, we built Micromax, as I say, from day one, making money-

Nikhil Kamath 57:11 Mm

Rahul Sharma 57:11 ... and doing that. D- you know, never raised any capital. Slowly, slowly, you know, build it and, uh, and whatever we, you know, we raised-

Nikhil Kamath 57:19 Said no to $800 million in 2014. [chuckles]

Rahul Sharma 57:22 So if you ask me [chuckles] and I say that-

Nikhil Kamath 57:25 You should have taken it.

Rahul Sharma 57:26 Yeah, because, see, that time we never knew that you had to create a war chest.

Nikhil Kamath 57:29 Yeah.

Carl Pei 57:29 Mm.

Rahul Sharma 57:31 You create a war chest and say, "Okay, now let's, you know, be-

Nikhil Kamath 57:33 The biggest bull run in Indian equity markets. Imagine you put that in equity.

Rahul Sharma 57:38 So-

Nikhil Kamath 57:38 2014 to today.

Rahul Sharma 57:39 Yeah. So, you know, with $800 million, you sit on the casino table and you say, "Okay, now play."

Nikhil Kamath 57:43 Yeah. [chuckles]

Rahul Sharma 57:45 Mm-hmm. Yeah. Yeah, so, and then after... Yeah, in, in 2009, then we realized that-

Nikhil Kamath 57:50 Mm

Rahul Sharma 57:50 ... you know, either we'll... You know, if we keep on burning with this pace, we will get finished. We'll get completely burned out. We will not have any capital left. So we said, "Okay, let's stop burning money-

Nikhil Kamath 58:00 Mm

Rahul Sharma 58:01 ... and, uh, wait for your turn, and start focusing on, on manufacturing." And that's how we started building more factories, uh, in '19, '20, '21, and now. And, uh, that's how we, you know, pivoted on the, on the manufacturing game. And the whole idea is that unless and until you have access to supply chain... For example, if today I have to make, uh-

Nikhil Kamath 58:29 Total

Rahul Sharma 58:29 ... a triple screen fold-

Nikhil Kamath 58:31 Mm

Rahul Sharma 58:33 ... I don't have access to the screen. So how do you come up with the latest?

Nikhil Kamath 58:37 When you say access to supply chain-

Rahul Sharma 58:39 Yes

Nikhil Kamath 58:39 ... you're talking about the company in China that gives you-

Rahul Sharma 58:42 That makes the screen, okay?

Nikhil Kamath 58:43 Yeah.

Rahul Sharma 58:43 That makes the display. But the other bigger company there, for example, Hua- let's say Huawei has a triple screen. Huawei has already blocked that, and said, "Okay, for one year, you can't give to anybody else, because I'm promising you this much of volume."

Carl Pei 58:55 So, so, Nikhil, uh, what, how it happens is all ma- partners, like supply chain partners, screen, battery, or processor, they work with bigger brands, and everybody has a alpha customer on their list.

Nikhil Kamath 59:06 Mm.

Carl Pei 59:06 Let's say Huawei would be the alpha customer on their list.

Nikhil Kamath 59:09 Mm.

Carl Pei 59:09 So every first technology would go to Huawei.

Nikhil Kamath 59:11 Mm.

Carl Pei 59:12 He will block that capacity, and when it is over, it will come to us. New technology means all resources they will depute to Huawei.

Rahul Sharma 59:19 Right.

Carl Pei 59:19 And then it will come to the market, and Huawei will take the first leg of new product which is launching, which goes for chipsets, screens-

Rahul Sharma 59:26 Yeah

Carl Pei 59:26 ... sensor, across.

Nikhil Kamath 59:27 But we'll never be able to make that on our own. For anybody wanting to start a consumer electronic company, you can't make that triple-fold screen that this supply chain vendor is making for Huawei.

Rahul Sharma 59:41 No, if you're like a startup startup, it is too hard to make.

Nikhil Kamath 59:43 No.

Rahul Sharma 59:43 Like, but it, it requires a lot of money, and probably he can ha-

Nikhil Kamath 59:47 He might be making it.

Rahul Sharma 59:48 He can, he can [chuckles]

Carl Pei 59:48 It's, uh, it's at a later stage.

Rahul Sharma 59:49 He can afford. Yes, later stage.

Carl Pei 59:50 It's usually at a later stage.

Rahul Sharma 59:51 Yeah.

Carl Pei 59:51 So if you look at Apple's strategy now-

Nikhil Kamath 59:53 Mm

Carl Pei 59:53 ... they feel like they're bleeding too much margin to their suppliers.

Nikhil Kamath 59:57 Yeah.

Carl Pei 59:57 So they're doing vertical integration. So they're developing

Carl Pei 1:00:00 their own technology, their own screen, their own whatever-

Nikhil Kamath 1:00:02 Mm

Carl Pei 1:00:02 ... processor.

Nikhil Kamath 1:00:03 I thought they're outsourcing more to Foxconn and they're-

Carl Pei 1:00:05 For, for manufacturing.

Rahul Sharma 1:00:06 It's only for EMS.

Nikhil Kamath 1:00:07 What is EMS?

Carl Pei 1:00:08 Assembling. Uh, you would tell better.

Nikhil Kamath 1:00:10 Just for assembling? Really?

Rahul Sharma 1:00:12 Yes.

Carl Pei 1:00:13 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-

Rahul Sharma 1:00:20 Yeah

Carl Pei 1:00:20 ... big PC companies. So they targeted a niche consumer, the creative consumer, and they positioned the personal computer as a bicycle for the mind.

Nikhil Kamath 1:00:28 Right.

Carl Pei 1:00:29 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-

Rahul Sharma 1:00:39 Yeah

Carl Pei 1:00:39 ... GarageBand. It's all to cater to the creator, right?

Rahul Sharma 1:00:42 Yes.

Carl Pei 1:00:42 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.

Rahul Sharma 1:00:54 Yeah, yeah.

Carl Pei 1:00:54 Adobe worked better on Apple computers.

Rahul Sharma 1:00:56 Yes.

Nikhil Kamath 1:00:56 Mm.

Carl Pei 1:00:57 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.

Rahul Sharma 1:01:20 Yeah.

Carl Pei 1:01:21 Now they do their own processors. Actually-

Rahul Sharma 1:01:23 Yeah

Carl Pei 1:01:24 ... what we talked about before, they get the TSMC latest, uh-

Rahul Sharma 1:01:27 There you need allocation.

Carl Pei 1:01:28 Yeah, they get the-

Rahul Sharma 1:01:29 Yeah

Carl Pei 1:01:29 ... they get the first batch-

Rahul Sharma 1:01:30 Yeah

Carl Pei 1:01:30 ... before everybody else.

Rahul Sharma 1:01:31 Mm.

Carl Pei 1:01:31 They get the latest technology from TSMC for Apple Silicon. Now they're doing a mini... Is it mini LED or micro LED? They, they have their own display technology. It's deployed on the Apple Watch already. I mean-

Rahul Sharma 1:01:43 Just the mini, yeah, the mini LED.

Carl Pei 1:01:44 Mini LED.

Rahul Sharma 1:01:45 Yeah.

Nikhil Kamath 1:01:45 So it's very hard for anyone to compete, right?

Carl Pei 1:01:47 It's a very tough industry.

Nikhil Kamath 1:01:49 And everybody who is an incumbent today has been around for 30, 40, 50, 100 years.

Carl Pei 1:01:57 Uh, Apple is, like, 50, I think. 50-ish.

Nikhil Kamath 1:02:00 Samsung is older.

Carl Pei 1:02:01 Yeah, but Samsung smartphone business should be similar, maybe 25 years. The Chinese brand, maybe 15 years.

Nikhil Kamath 1:02:10 Right.

Carl Pei 1:02:10 So every 10 years, the, the cards will-

Rahul Sharma 1:02:14 Flip

Carl Pei 1:02:14 ... will, will flip.

Rahul Sharma 1:02:15 Yeah, so I think this is a very interesting thing, um, is you're talking about competing, all right? Nobody can come up. We came up at that time-

Nikhil Kamath 1:02:23 Yeah

Rahul Sharma 1:02:24 ... def- defying the odds. You know-

Nikhil Kamath 1:02:25 Yeah

Rahul Sharma 1:02:25 ... globally there was a-

Nikhil Kamath 1:02:27 Yeah

Rahul Sharma 1:02:27 ... uh, you know, no brand, like a local brand who came, like, and became a, like, we were top 10 in the world, and that's how it was going. I still feel that can happen, right? But we never realized that governments have to, you know, have a- to play a role in it. Because that time we never thought about the governments and the countries and all. Now we realize about countries, governments, and everything.

Nikhil Kamath 1:02:50 What should the government do?

Rahul Sharma 1:02:51 Yeah. So, for example, you take our automobile industry in India. I think we have done a great job there. All the Hondas and Suzukis came initially, did joint ventures with the Indian companies, created a lot of ecosystem of, uh, supply chain. You see all the component players.

Nikhil Kamath 1:03:11 Yeah.

Rahul Sharma 1:03:12 Right? And, uh, now if you see our automobile industry, we are supplying to the world now. We are a very mature industry in automobile.

Nikhil Kamath 1:03:19 And if the same thing were true for mobile phones, what happened to Micromax would not have happened?

Rahul Sharma 1:03:24 Maybe, uh, you know, the, the world order would have been different in terms of the brands.

Nikhil Kamath 1:03:29 Right.

Rahul Sharma 1:03:29 Yeah. So any industry, you need to see that you want to make local champions. So, for example, today in the worldly order, imagine if there are two, three local champions coming out of India who can make a global impact. I think it would be great for the country.

Nikhil Kamath 1:03:45 But if we... There's a flip side to that argument, that if we become protectionist of local industry, do we continue to get foreign money into the country?

Rahul Sharma 1:03:56 So I'm not saying that you stop.

Nikhil Kamath 1:03:57 Mm.

Rahul Sharma 1:03:57 I'm saying you do... You allow collaborations.

Nikhil Kamath 1:04:00 Mm.

Rahul Sharma 1:04:01 Collaborations where you need to learn. For example, if you make-

Nikhil Kamath 1:04:03 Collab- collaborations with technology transfer.

Rahul Sharma 1:04:05 Absolutely.

Nikhil Kamath 1:04:06 IP transfer.

Rahul Sharma 1:04:06 Yes. No, work on IP transfer, and then you learn.

Nikhil Kamath 1:04:09 Mm.

Rahul Sharma 1:04:09 So in four, five years, you will learn.

Nikhil Kamath 1:04:11 Mm.

Rahul Sharma 1:04:12 Right? Same as I said, auto happened, you know, at that time. Now, today you have all the local companies ruling the roost.

Nikhil Kamath 1:04:17 Mm.

Rahul Sharma 1:04:18 Similarly, you learn here, five years, six years. So a lot of people ask me, "Okay, can you do this? Can you make a, you know, a very complex phone?" We said, "Yes, we can make a very complex phone, but maybe it will take five years, six years in India to do that." But with collaboration, we- I can start learning right away, and then can do it, you know, very, very quickly.

Nikhil Kamath 1:04:36 And how much did this three million phones a number fall to when things went bad at Micromax?

Rahul Sharma 1:04:42 No, no, it slowly started coming. Every year, it started coming up, we start losing. At that time, all the Indian brands were more than 50% of the India market, market share-

Nikhil Kamath 1:04:49 Right

Rahul Sharma 1:04:50 ... which completely got decimated.

Nikhil Kamath 1:04:52 Right. What was the low for Micromax as a company? Which year was the low?

Rahul Sharma 1:04:56 I think that time in 2019-

Nikhil Kamath 1:05:00 Mm

Rahul Sharma 1:05:00 ... 2020, we, uh, you know, in the, in terms of the brand, we said, "Okay"-

Nikhil Kamath 1:05:03 Just before COVID.

Rahul Sharma 1:05:04 Yeah, we said, "Okay, no more."

Nikhil Kamath 1:05:05 And then COVID could not have been fun.

Rahul Sharma 1:05:06 No more. [laughing] Correct.

Nikhil Kamath 1:05:08 [laughing] Right?

Rahul Sharma 1:05:10 Yeah.

Nikhil Kamath 1:05:11 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?

Rahul Sharma 1:05:20 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.

Nikhil Kamath 1:05:27 Yeah.

Rahul Sharma 1:05:28 But we are doing way more better than what we used to do earlier.

Nikhil Kamath 1:05:31 Yeah. No, I know the Micromax comeback story.

Rahul Sharma 1:05:32 No, I know, I know.

Nikhil Kamath 1:05:33 I want to come to that next.

Rahul Sharma 1:05:33 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.

Nikhil Kamath 1:05:43 What did you realize is your core?

Rahul Sharma 1:05:45 So my core was to remain with tech. So, for example, not start a real estate company.

Nikhil Kamath 1:05:49 Mm.

Rahul Sharma 1:05:49 Or real estate is doing good, go there.

Nikhil Kamath 1:05:51 Mm.

Rahul Sharma 1:05:51 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.

Nikhil Kamath 1:06:00 Mm-hmm.

Rahul Sharma 1:06:00 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-

Nikhil Kamath 1:06:18 You just acquired a new factory as well?

Rahul Sharma 1:06:19 Yeah.

Nikhil Kamath 1:06:20 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-

Rahul Sharma 1:06:33 Mm

Nikhil Kamath 1:06:34 ... the next time they're a little bit more differentiated in their approach.

Rahul Sharma 1:06:39 This weekend I was thinking that.

Nikhil Kamath 1:06:41 Mm.

Rahul Sharma 1:06:42 Believe me, yeah.

Nikhil Kamath 1:06:42 In Goa?

Rahul Sharma 1:06:43 Yeah. [chuckles]

Nikhil Kamath 1:06:45 Ah. [chuckles]

Rahul Sharma 1:06:45 I was thinking about that-

Nikhil Kamath 1:06:46 Mm

Rahul Sharma 1:06:47 ... about something-

Nikhil Kamath 1:06:48 Mm

Rahul Sharma 1:06:48 ... I used to do earlier.

Nikhil Kamath 1:06:50 Mm.

Rahul Sharma 1:06:50 And then, uh, I again thought, I'm still doing the same thing.

Nikhil Kamath 1:06:54 Which is?

Rahul Sharma 1:06:55 In taking big bets, going risky and all. Like, at the, you know, once you start doing, I said, "Okay, no, no, no more, no more."

Nikhil Kamath 1:07:02 Mm.

Rahul Sharma 1:07:03 Stick, stick to your, you know... But, uh-

Nikhil Kamath 1:07:06 Risk is intoxicating, no?

Rahul Sharma 1:07:08 It is.

Nikhil Kamath 1:07:09 While you're taking it.

Rahul Sharma 1:07:11 Yeah.

Nikhil Kamath 1:07:11 It gives you a high.

Rahul Sharma 1:07:12 Yeah.... and believe that, okay, no, no, no, this is something which I think you can do, you can crack it.

Nikhil Kamath 1:07:18 Mm.

Rahul Sharma 1:07:19 And then you go for it. And because it has worked earlier, then you start thinking, then you know everything, you know, every time it's going to, which is not the case.

Nikhil Kamath 1:07:26 Mm.

Rahul Sharma 1:07:27 Um, so yes, while, you know, we are doing this, I'm, I'm more aware, but, uh, but the core is that, na?

Nikhil Kamath 1:07:34 Mm.

Rahul Sharma 1:07:34 So once your core is that, you will-

Nikhil Kamath 1:07:36 Mm

Rahul Sharma 1:07:37 ... you will want to take bigger bets, also thinking, "Okay, ...," you know, you came out of it, see?

Nikhil Kamath 1:07:44 Mm-hmm.

Rahul Sharma 1:07:46 So I think that's the DNA.

Nikhil Kamath 1:07:47 As long as the bets don't go wrong-

Rahul Sharma 1:07:49 Mm

Nikhil Kamath 1:07:50 ... they always get bigger-

Rahul Sharma 1:07:51 Yeah

Nikhil Kamath 1:07:51 ... organically.

Rahul Sharma 1:07:51 Yeah.

Nikhil Kamath 1:07:52 If you had to bet money on some in- some entrepreneur today, wouldn't you pick somebody who has screwed up a couple of times versus somebody who's doing it for the first time?

Amit Khatri 1:08:04 Screwed up a couple of times, but eventually made it.

Nikhil Kamath 1:08:06 Yeah.

Rahul Sharma 1:08:06 Yeah. That is important.

Nikhil Kamath 1:08:08 Yeah.

Rahul Sharma 1:08:08 Yeah. If eventually made it, then-

Nikhil Kamath 1:08:11 Yeah

Rahul Sharma 1:08:11 ... yeah, that's fine.

Nikhil Kamath 1:08:12 I feel like this prophecy is true for all life. I like people who are a little bit screwed up, in all domains. When I meet a man and I don't know what his vice is, I assume the worst. I'd rather know, okay, this is my friend, he's [beep] up like this-

Rahul Sharma 1:08:29 Mm

Nikhil Kamath 1:08:29 ... I'm aware. I'm [beep] up like that, he's aware.

Rahul Sharma 1:08:31 Mm.

Nikhil Kamath 1:08:31 This friendship is good.

Rahul Sharma 1:08:33 Mm-hmm.

Nikhil Kamath 1:08:34 When somebody comes to me and projects the idealistic mask-

Rahul Sharma 1:08:38 Mm

Nikhil Kamath 1:08:38 ... then I worry.

Rahul Sharma 1:08:39 Mm.

Nikhil Kamath 1:08:40 Because we are all the same at the core of it, you know? We're all inherently flawed as people.

Rahul Sharma 1:08:44 100%.

Nikhil Kamath 1:08:45 Yeah. Yeah. But thank you for that. [laughing]

Rahul Sharma 1:08:51 [laughing]

Nikhil Kamath 1:08:52 All right, Mr. Amit, you're next. Tell us.

Amit Khatri 1:08:56 I think, uh-

Nikhil Kamath 1:08:57 I'm very interested in your story, 'cause both of their

Nikhil Kamath 1:09:00 stories, him I know firsthand-

Amit Khatri 1:09:01 Yeah

Nikhil Kamath 1:09:01 ... and his I've read a bit, but your story is not so much out there.

Amit Khatri 1:09:06 So, so I come from a small town, Bikaner, Rajasthan, and typical middle-class family. Father used to work with bank, uh, and-

Nikhil Kamath 1:09:15 Which bank?

Amit Khatri 1:09:15 State Bank of Bikaner & Jaipur, if you would have heard of.

Nikhil Kamath 1:09:18 Yeah.

Amit Khatri 1:09:18 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-

Rahul Sharma 1:09:48 ... just two days type

Amit Khatri 1:09:48 [laughing]

Rahul Sharma 1:09:49 När, när. [laughing]

Nikhil Kamath 1:09:50 No, no, he's fit.

Rahul Sharma 1:09:51 Yeah?

Nikhil Kamath 1:09:51 And he went to NIFT.

Rahul Sharma 1:09:53 Oh, really?

Nikhil Kamath 1:09:54 NIFT

Rahul Sharma 1:09:54 Yeah.

Nikhil Kamath 1:09:55 Nayi na?

Rahul Sharma 1:09:56 Hmm?

Nikhil Kamath 1:09:56 They are, the NIFT ones are the cool ones.

Rahul Sharma 1:09:58 Yeah, cool ones.

Nikhil Kamath 1:09:58 I have some colleagues who are from there.

Rahul Sharma 1:10:00 Yeah.

Nikhil Kamath 1:10:01 Sometimes over-smart, right? [laughing]

Rahul Sharma 1:10:03 [laughing] What is that?

Amit Khatri 1:10:05 Fashion college.

Rahul Sharma 1:10:06 Oh.

Nikhil Kamath 1:10:06 Yeah, it's like where all the cool kids go.

Amit Khatri 1:10:09 So anyways, uh, studied-

Nikhil Kamath 1:10:10 See, his shirt has a very differentiated color.

Amit Khatri 1:10:15 So-

Nikhil Kamath 1:10:15 It's not white, right? [laughing]

Amit Khatri 1:10:17 [laughing]

Nikhil Kamath 1:10:18 What color is it?

Amit Khatri 1:10:20 Somewhere off-white, beige-ish. So I went, uh... People wo- uh, my parents wanted me to, to become a doctor, and, uh, actually I was pushed towards that career, because in small towns, I think those were the two choice. And apparently went to Kota also for, uh, PMT preparation, medical test at that time-

Nikhil Kamath 1:10:40 Mm

Amit Khatri 1:10:40 ... for crash course.

Nikhil Kamath 1:10:41 Mm.

Amit Khatri 1:10:41 But eventually re- realized that I think I can't do that. And fortunately, what happened, that my father was very, you know, uh, bold, that he want to get out of Bikaner, move to a bigger city, and he moved to Kanpur, actually. He got posted there. And when he moved there, I realized that it's just not, uh, this as a career. There are people who are securing 80%, 85% marks and going to Delhi for B.Com. So I realized that mass comm is a course, uh, B.Com is a course, arts people are doing because of passion, and went through... well, family, good educated kids. Then I realized that medical I don't want to do. Uh, I enjoyed maths, physics, those kind of subjects, where I don't need to mug up. And definitely a small-town kid going to a bigger city, so you get a little bit buoyed away by what's happening there. Uh, I realized that... Then parents said, "Do an IIT." Then I realized it's too late for me to do an IIT now, otherwise it will ask me to bunk for three years. And it's, I think it's, uh, '98, '99, and, uh, eventually after graduation, started preparing for competitive exams, and formally landed into NIFT. So I think, uh, NIFT Hyderabad was a real life, uh, learning for me. Uh, first time hostel, getting out of, uh, home, and I was into fashion management, not design, but maybe all the peers were design, uh, guys. And again, s- uh, dad took a loan for me to go to college, so I had always limitation that I should not be spending more, and when my friends had higher pocket money. So I think my entrepreneurship stint started from there.

Nikhil Kamath 1:12:13 Tell me things about yourself that I can't Google or watch in another interview of yours, 'cause that's boring, I don't wanna know.

Amit Khatri 1:12:21 Well, I mean, uh, a notorious kid, definitely. And, uh, I mean, I always had the hunger to do something different. And in college, like I said, I used to look for alternate sources. I was, again, uh... let's say there was, Hitech City was all call centers, if you look into it, Hyderabad at that time, Convergys and all. So I thought of maybe doing a job at a call center, maybe picked some project at Convergys. Not Convergys, maybe Infosys was there. Went to ISP to pitch something.

Nikhil Kamath 1:12:52 Mm.

Amit Khatri 1:12:53 And maybe just started picking up, you know, some projects at our college only, where, you know, there was a fest happening, could you bundle the T-shirt? So I think my first entrepreneurship time happened from there on, where we s- I started making a little bit of pocket money from there.

Nikhil Kamath 1:13:06 Mm.

Amit Khatri 1:13:06 But I was always, uh, insecure in life that I'll not get the job. Otherwise, I was like-

Nikhil Kamath 1:13:12 So you finished college, and what did you do first?

Amit Khatri 1:13:14 Yeah, uh-

Nikhil Kamath 1:13:15 When did you finish college?

Amit Khatri 1:13:16 So I finished college in 2004.

Nikhil Kamath 1:13:18 Mm.

Amit Khatri 1:13:18 And I got placed in a manufacturing setup, uh, Orient Craft, if you would know-

Rahul Sharma 1:13:23 Mm

Amit Khatri 1:13:23 ... based out of Gurgaon.

Rahul Sharma 1:13:25 Mm.

Amit Khatri 1:13:25 So there's, there's one of the, uh, la- one of the largest export house out of India.

Nikhil Kamath 1:13:28 Mm.

Amit Khatri 1:13:29 I thought I would not get a better job than this, so I stayed there.... and I worked for three and a half years there. Uh, it was typically merchandising, and two years I did merchandising, I found it very boring. And I thought of leaving the job that time, because if you would know, merchandising is buyers say you something, and then you copy-paste do it. I used to work for Ann Taylor, Gap, all those brands. And then I started giving interviews, actually, everywhere outside. I went to Barista, "Can I do a job in marketing?" Coffee Day was big. There was a ba- I went to Air Deccan for an interview to apply for marketing, because I was, was fed up of my career at that time.

Nikhil Kamath 1:14:04 Ironically, three people who have proficiency in marketing are running consumer electronic companies.

Amit Khatri 1:14:09 We could catch the-

Nikhil Kamath 1:14:10 So maybe that's a prerequisite

Amit Khatri 1:14:11 ... which we could catch the market, uh, pulse well, actually.

Nikhil Kamath 1:14:15 Mm.

Amit Khatri 1:14:16 And, uh, maybe I didn't get a job anywhere outside, and, uh, I started taking on all special projects at the company. What all the pain problems of the company, I could take that and-

Nikhil Kamath 1:14:26 And you worked with your brother?

Amit Khatri 1:14:27 No, no, no. Uh, so my brother is 10 years younger to me.

Nikhil Kamath 1:14:30 Uh.

Amit Khatri 1:14:30 So he came in, uh, maybe ...

Nikhil Kamath 1:14:34 25.

Amit Khatri 1:14:37 For 15, 16, he came in, so I was, uh-

Nikhil Kamath 1:14:40 So he's 28?

Amit Khatri 1:14:41 So it's... We are talking about 2005 to 2008.

Nikhil Kamath 1:14:44 He's 28 years old.

Amit Khatri 1:14:45 No, he's 35. 34, 35.

Nikhil Kamath 1:14:47 You're 38?

Amit Khatri 1:14:48 No, I'm 43.

Nikhil Kamath 1:14:49 You're 43?

Amit Khatri 1:14:51 Yeah, yeah, 43.

Nikhil Kamath 1:14:52 Mm.

Amit Khatri 1:14:53 So anyways, I worked there for three and a half years, and then started picking up-

Nikhil Kamath 1:14:56 You look very good, yeah, for 43 [chuckles] .

Amit Khatri 1:14:59 Trying to. Working with young founders-

Nikhil Kamath 1:15:02 Uh, uh.

Amit Khatri 1:15:03 -so you have to-

Nikhil Kamath 1:15:04 Uh

Amit Khatri 1:15:04 ... stay true to that.

Nikhil Kamath 1:15:05 Mm.

Amit Khatri 1:15:06 Anyways, so I worked for three and a half years.

Nikhil Kamath 1:15:09 Mm.

Amit Khatri 1:15:09 Uh, they moved me to... I saw a huge gap in their international product development.

Nikhil Kamath 1:15:14 Mm.

Amit Khatri 1:15:14 I picked up that piece, and, and that's my journey started. I moved to Hong Kong for the first time, and I think it was 2007 era, where I saw glo- where I saw global brands were there. And whenever I used to travel, people used to ask me, "Go and buy this thing for me, that thing for me." Chaldal, I used to import a lot of BlackBerries from there. I think it was BlackBerry time.

Nikhil Kamath 1:15:32 Mm-hmm.

Amit Khatri 1:15:33 So I used to buy and trade off for 1,000 to 2,000 bucks and sell, sell it in India in my office. It was like jailbreak phones.

Nikhil Kamath 1:15:40 Yeah.

Amit Khatri 1:15:40 So every time I used to go buy 10 phones-

Nikhil Kamath 1:15:42 Mm

Amit Khatri 1:15:43 ... and bring it here, and eventually I realized that I'm solving a bigger problem, not electronics, but textile. Let me do it myself. And I started my first business, uh, in 2007, which was, uh, fashion accessory, textile merchandising, basically. Buying house, cozy concept, and I had 60,000 bucks in my pocket, and again, how could you do a business with 60,000 bucks? So I started it in '07, based out of Hong Kong, and, uh, I think that's where my journey with, uh, H&M started. H&M was my first customer. I worked with them very closely with the design team, so that's how I realized, okay, uh, there is a... There are brands which are built at center. So India was, uh, I think, fashion, uh, Big Bazaar time, that time. It was Micromax and Big Bazaar which were at the bottom, and H&M was right at the center, not cheap, not luxury, but selling to the, to the world. Uniqlo, H&M, and that's how my, I think, uh, my roots got leveled at good quality product at an affordable price. Not the cheapest, not the expensive. I did that business for seven and a half years, eight years, trav- traveling a lot, and then Gaurav, my cousin, actually, he tw- he was 21. He became commercial pilot. I think Air Deccan time or Kingfisher or Jet Airways, something tanked, no job, and he asked me to get a iPhone that time. It was just launched. And I said, "Are you mad?"

Nikhil Kamath 1:17:06 What year?

Amit Khatri 1:17:07 I think, uh, what year? What year iPhone, what year?

Nikhil Kamath 1:17:10 The first one.

Amit Khatri 1:17:11 Yeah.

Nikhil Kamath 1:17:12 2007 or '08.

Speaker 1:17:13 '08.

Amit Khatri 1:17:14 2007, '08? So I think, no, he asked me to get the iPhone 3 sometime.

Nikhil Kamath 1:17:18 Mm.

Amit Khatri 1:17:18 So I got an iPhone 3 for him, and I said, "Are you mad? It is 25,000 bucks." And I got a jailbreak from, phone from Hong Kong for him, and, uh, I got a phone for him. He said, "Then I need to buy a cover for this," and there were no covers for that phone. And that's how our journey started, okay? He said, "Let me get... Uh, I have a problem, can you solve it for me?"

Nikhil Kamath 1:17:39 Mm.

Amit Khatri 1:17:40 "If I have a problem, my other friends would have a problem." So we started mobile accessories that time.

Nikhil Kamath 1:17:45 In which year?

Amit Khatri 1:17:46 I think 2014, '15. I think Xiaomi came to India that time. We launched iPhone covers, we flopped. All stocks are at home.

Nikhil Kamath 1:17:54 Under the name Noise, no?

Amit Khatri 1:17:55 Yeah, it's under the name Noise.

Nikhil Kamath 1:17:56 So the company started in 2014?

Amit Khatri 1:17:58 '14, '15, we started, uh, doing mobile accessories as a side job. He was, as a hobby, doing it.

Nikhil Kamath 1:18:03 Mm.

Amit Khatri 1:18:03 I was doing my business, what I was doing.

Nikhil Kamath 1:18:06 Mm.

Amit Khatri 1:18:06 And then, uh, iPhone, we had a huge failure because the market would be, what, 0.5%? We were the only few customers-

Nikhil Kamath 1:18:14 Mm

Amit Khatri 1:18:14 ... buying iPhone. And then, uh, we flipped to Xiaomi. He was doing a side project, and that's our journey kicked in.

Nikhil Kamath 1:18:21 And then what happened?

Amit Khatri 1:18:23 Ah, we... The business started becoming very big. The phone, all Chinese guys came in, the business started becoming very big, and we-

Nikhil Kamath 1:18:30 You sold accessories for the Chinese phones?

Amit Khatri 1:18:32 Yeah, we sold accessories, because, see, please understand, I could do... Uh, we couldn't do tech. I was coming from a fashion background. I just knew designs, and a mobile cover is just an accessory. I mean, it's like a T-shirt.

Nikhil Kamath 1:18:44 Mm.

Amit Khatri 1:18:44 It's, it's such a simple product. You get it, you print it. We s- had a small setup also manufacturing in a factory, where we used to ship thousands of cases every day, and then we realized that this market is getting super commoditized.

Nikhil Kamath 1:18:56 And then when did Noise blow up?

Amit Khatri 1:18:59 I think in-

Nikhil Kamath 1:18:59 COVID?

Amit Khatri 1:19:00 No, no, no, not COVID. I think we started picking up in '19. I'll tell you the, the, the, the trajectory, what happened in between. So we're doing cases, it was fine, and we realized that the pricings are going down. I mean, we started selling for 500 bucks, and eventually it landed to 150, and 150, whatever case you sell, you can't make a big company. So we were growing, but we were some 100, uh, crore, uh, revenue company. Then we thought of starting doing different categories. We launched... Everybody said, "Marketplaces, Flipkarts of the universe. Uh, why don't you do headphones, neckbands, or whatever categories?" We did that, we failed. There was no differentiation.... there was no differentiation. And then out of interest, we realized what categories to pick. Uh, so our thesis was clear, we'll not fight the big boys. Like Sony was selling what, wired earphones, or Philips. I said, "Why would somebody buy us?" Till that time, we were cheaper, and you can't be cheaper. Till that time, you cut cost. And we were searching for, uh, smartwatch for ourself that time in 19 something, uh, I don't remember that time, and only Fitbit was available for 20,000 grands, Fitbit Blaze or something. We got a refurb watch for 10,000. We realized, "Is this a gap in the market?" And that's how we started doing watches. The market was 2 million units that time, maybe 2 million in a year, and which nobody was doing watches. We started then, and then it picked up in three, four years, and COVID, it picked up. So I think there was a tipping point of, uh-

Nikhil Kamath 1:20:26 So watch was the tipping point?

Amit Khatri 1:20:28 Watch was the tipping point for us.

Nikhil Kamath 1:20:30 Because you were able to buy refurbished for cheaper and-

Amit Khatri 1:20:33 No, no, no. Buy... We bought refurbished for ourself, but then realized that there is a market which exists. Can we, uh, do in our brand where we could do a 5,000, 8,000 rupees watch, which is affordable to a mid-level consumer? Good part, Gaurav was 25 that time, so he had that young taste. He never wanted to buy cheap-

Nikhil Kamath 1:20:51 Mm.

Amit Khatri 1:20:51 ... and he never wanted to buy the most expensive one, and all India market was Chinese knockoffs.

Nikhil Kamath 1:20:56 Mm.

Amit Khatri 1:20:56 So that was the desire to build, can we use something for ourself and gift it to friends, family?

Nikhil Kamath 1:21:01 And today you are more known for earbuds?

Amit Khatri 1:21:04 No, no, we are not known for... We are less known for earbuds. We are a dominant share for watches. Watches is more tough category.

Nikhil Kamath 1:21:11 How much is your share now?

Amit Khatri 1:21:13 We would be north of 25% for last three, four years. So watches are more complicated.

Nikhil Kamath 1:21:17 How big is that market?

Amit Khatri 1:21:20 It's close to a billion dollar market revenue.

Nikhil Kamath 1:21:24 Wow! So how, how much are you selling now, Noise, in terms of revenues?

Amit Khatri 1:21:28 We would be... Watches, we would have close to 10, 15, 10, 14% of the revenue share.

Nikhil Kamath 1:21:33 So about 100, 140 million.

Amit Khatri 1:21:36 Hun- close to 100 million of, uh-

Nikhil Kamath 1:21:38 And the rest of the products in Noise?

Amit Khatri 1:21:40 Are audio devices. So as of now, we were very clear that we have limited cap- capital. We bootstrapped the business, so we couldn't go very width wise. We never had the-

Nikhil Kamath 1:21:49 Have you raised money now?

Amit Khatri 1:21:51 We... Last year, we raised a strategic, uh, investment from Bose Corporation.

Nikhil Kamath 1:21:55 And now how big is the business, revenue wise?

Amit Khatri 1:21:58 We would be somewhere sitting, uh, between 150 to 200 million, that kind of revenue.

Nikhil Kamath 1:22:04 100 in watches and 50 to two-

Amit Khatri 1:22:06 Yeah.

Nikhil Kamath 1:22:06 Another 100 in other stuff.

Amit Khatri 1:22:08 And we are very clear we'll, uh, go deeper in the category because we never had capital to experiment multiple ways.

Nikhil Kamath 1:22:14 Crazy, yeah? Super impressive to have been boot- able to bootstrap to that scale, right?

Amit Khatri 1:22:19 Absolutely.

Carl Pei 1:22:20 Yeah, I didn't know that.

Amit Khatri 1:22:20 Absolutely.

Carl Pei 1:22:21 I thought you guys had raised a venture earlier.

Amit Khatri 1:22:23 No, we didn't. I think it, uh, it became a blessing for us because first, we never had to dress up our company for any external benefit. Like today, sometimes investor says, "Chase GMV." Second day they cha- say, "Chase market share," and sometimes profit. So we were in that luxury of, uh, taking our decisions which were right for the business in long run. So having l- less set of people, having less products, go deeper in the categories where you are in.

Carl Pei 1:22:51 But Nikhil, this is what the difference is. You know, these are the real businesses.

Nikhil Kamath 1:22:55 Yeah.

Carl Pei 1:22:55 Because, see, if you see all older, you know-

Nikhil Kamath 1:22:57 Mm

Carl Pei 1:22:58 ... businesses-

Nikhil Kamath 1:22:58 Yeah

Carl Pei 1:22:59 ... they were all coming from their own capital or having access only to the banks-

Nikhil Kamath 1:23:04 Yeah

Carl Pei 1:23:04 ... you know, and taking the debt from the banks and doing those things. It was not like raising an insane amount of capital and then say, "Okay, you go and experiment with somebody else." [chuckles]

Nikhil Kamath 1:23:12 Yeah, yeah, yeah.

Carl Pei 1:23:13 Right? So I think, yeah, these are the examples.

Nikhil Kamath 1:23:17 No, no, crazy impressive.

Carl Pei 1:23:18 Yeah.

Nikhil Kamath 1:23:18 I like pushing people to see how they defend themselves.

Carl Pei 1:23:20 Yeah. [chuckles]

Nikhil Kamath 1:23:21 I'm trying to figure out how to push Amit.

Carl Pei 1:23:22 Yeah.

Nikhil Kamath 1:23:23 Okay, so what is today for? Today is for any young Indian boy or girl under the age of 25, wants to start a consumer

Nikhil Kamath 1:23:34 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?

Carl Pei 1:24:19 Should I start with smartphones?

Nikhil Kamath 1:24:20 Yeah.

Carl Pei 1:24:21 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.

Nikhil Kamath 1:24:40 ASP is?

Carl Pei 1:24:41 Average selling price.

Amit Khatri 1:24:42 Average selling price.

Carl Pei 1:24:42 Average selling price.

Nikhil Kamath 1:24:43 Very different in India compared to the rest of the world?

Carl Pei 1:24:46 Probably, yeah. Every country is different, depending on the, the market dynamics.

Amit Khatri 1:24:50 Per capita as well.

Carl Pei 1:24:51 Yeah.

Nikhil Kamath 1:24:52 Where is the sweet spot? If I want to start making a cell phone today, where would I price it?

Carl Pei 1:25:00 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.

Amit Khatri 1:25:10 But you need to understand that what exactly, if you want to make that, what exactly are you trying to solve?

Nikhil Kamath 1:25:15 Mm.

Amit Khatri 1:25:15 Are you trying to, let's say, make a luxury brand?

Nikhil Kamath 1:25:18 Mm.

Amit Khatri 1:25:18 Or are you make- going to make a mass brand?

Nikhil Kamath 1:25:21 Mm.

Amit Khatri 1:25:21 Basis that, you need to figure out your TAM.

Nikhil Kamath 1:25:26 Mm.

Amit Khatri 1:25:26 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-

Carl Pei 1:25:39 ... $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.

Amit Khatri 1:25:50 So m- maybe let me break it for India market perspective, so that at least-

Carl Pei 1:25:54 Yeah

Amit Khatri 1:25:54 ... viewers could understand it well. In a category like, uh, truly wireless, for an example, the India market would be, like, 60 million units-

Nikhil Kamath 1:26:01 In a category like?

Amit Khatri 1:26:02 Audio devices, for an example, like this. This market would be, like, 60 million devices, which is six crores.

Carl Pei 1:26:08 Yeah.

Amit Khatri 1:26:09 And 90% of the sa-

Nikhil Kamath 1:26:10 And value-wise?

Amit Khatri 1:26:12 Uh, around a billion dollar-

Nikhil Kamath 1:26:14 Mm-hmm

Amit Khatri 1:26:14 ... market value. So-

Nikhil Kamath 1:26:16 Can you just tell me, for India-

Amit Khatri 1:26:19 Yeah

Nikhil Kamath 1:26:19 ... specifically.

Amit Khatri 1:26:21 Yeah.

Nikhil Kamath 1:26:21 How much is smartphone? How much is TV? How much is earphone? How much is watch?

Amit Khatri 1:26:26 So, uh, like, uh, this, uh, phones would be about $150 million phones, 150 million devices in India, am I right?

Carl Pei 1:26:34 Yeah, 150 million smartphones.

Amit Khatri 1:26:35 Smart-

Carl Pei 1:26:35 And then let's say, still-

Amit Khatri 1:26:36 Total

Carl Pei 1:26:36 ... there are, like, around 50, 60 million feature phones.

Amit Khatri 1:26:38 Feature phones.

Nikhil Kamath 1:26:39 Mm.

Amit Khatri 1:26:39 So on a broad level, India has a penetration of 6 million... 600 million smartphone users in the country. That's the right ways to look at it.

Nikhil Kamath 1:26:48 60 crore people use smartphones. Is that right?

Carl Pei 1:26:51 Yeah.

Nikhil Kamath 1:26:51 More or less?

Carl Pei 1:26:51 More or less, yeah. But I think you gotta look at the annual, like 120-

Amit Khatri 1:26:54 Yeah

Carl Pei 1:26:54 ... 140 number times about-

Nikhil Kamath 1:26:55 Yeah

Carl Pei 1:26:56 ... 300.

Nikhil Kamath 1:26:56 They probably say that 72 billion is the consumer electronic market in India.

Carl Pei 1:27:01 How much?

Nikhil Kamath 1:27:02 72 billion, per year. 72-

Amit Khatri 1:27:06 Total consumer electronics?

Carl Pei 1:27:09 USD or INR?

Nikhil Kamath 1:27:10 In-

Carl Pei 1:27:11 USD.

Amit Khatri 1:27:11 No, billion dollar-

Carl Pei 1:27:11 Dollar he's talking about

Amit Khatri 1:27:12 ... In that, they say cell phones, smart plus-

Carl Pei 1:27:16 Feature

Amit Khatri 1:27:16 ... feature is 50 billion.

Nikhil Kamath 1:27:19 Very true. I think large market would be smartphones only.

Carl Pei 1:27:21 Mm-hmm.

Nikhil Kamath 1:27:23 Right?

Carl Pei 1:27:23 Yeah.

Nikhil Kamath 1:27:24 So in all the consumer electronics in India, because you make TVs and everything else-

Amit Khatri 1:27:29 Yeah

Nikhil Kamath 1:27:29 ... and you make earphones and watch and all that, where is the opportunity for me? Say, I'm a 20-year-old kid who has managed to raise some money from somewhere, and I want to compete in this space. Where is the opportunity? Tell me anything. Tell me wired earphone, tell me...

Amit Khatri 1:27:47 No, so, uh, so first of all, I think anybody who want to enter a space, first of all, uh, everybody should enter to a space which is growing and has a larger TAM. There is no point to enter to a space which doesn't grow or doesn't have a future, for an example, or it's not large enough because-

Carl Pei 1:28:03 So you're saying first you pick a box of that target-

Amit Khatri 1:28:05 I mean, if that segment is-

Carl Pei 1:28:06 ... your TAM

Amit Khatri 1:28:06 ... big and growing-

Carl Pei 1:28:07 Yeah

Amit Khatri 1:28:07 ... then it's a point to go, because if you're a 2% player also, you'll be a sizable company. Let's say if you now go in a market which is 1,000 crore overall revenue, you become 5% also, you'll be a 50 crore company. Doesn't make sense.

Nikhil Kamath 1:28:18 Which one is growing the fastest?

Amit Khatri 1:28:21 No, so... Okay, in our space, let me be- let me take you through top-down, you might understand. Let's say in this case, this is a 60 million odd devices we sell in a year, which is 6 crores. And interestingly, 90% devices get sold below $25, which is sub 2,000 rupees.

Nikhil Kamath 1:28:37 You're talking about Bluetooth earphones?

Amit Khatri 1:28:38 Bluetooth earphones. So if s- and that is 60% of the market revenue, so which is, what, uh, 5,000 crore is like, uh, this market.

Nikhil Kamath 1:28:49 Mm.

Amit Khatri 1:28:50 And $25 to $75, which is medium segment, entry mid-premium, that is close to 7% and would be 15% of the market. And then there is all $150-plus, majority Apple, 1% market share, and then 10%-

Nikhil Kamath 1:29:08 So are you saying it's a good market if I want to start? Say I've raised $1 million, should I start a earphone, earpod company?

Amit Khatri 1:29:16 So I personally think technology works in a very different way. It's not like fashion, where you just, uh, create a product and sell at any price point. Uh, technology, you need an access to partners we were talking about, all prop- a lot of proprietary things. So I think it's a very tough space for somebody to enter. Yes, somebody want to enter into sub $20, yes, they can, but that's a race to bottom. And 20 to 50, which is a sweet spot, like 1,000 or 1,500 crore markets, it's, it's tough, and bigger brands are sitting there.

Nikhil Kamath 1:29:45 And when you say partner, everybody's partner is China?

Amit Khatri 1:29:48 No, no, it's not about those partners. We have partners... So one is, uh, partners who are giving us chipsets, but then you need to have your own app, app teams. You need to have your own algorithms we were talking about.

Nikhil Kamath 1:30:01 Mm-hmm.

Amit Khatri 1:30:01 So those expertise is also needed.

Carl Pei 1:30:03 Uh, mainly supply chain.

Amit Khatri 1:30:05 Supply chain, yes.

Carl Pei 1:30:05 So there's... For us, we have, uh, US partners, Chinese partners-

Amit Khatri 1:30:08 Yeah

Carl Pei 1:30:08 ... Japanese, Korean. Yeah, so it's very international.

Nikhil Kamath 1:30:12 So how do I... Say, I have an idea to start a earpod company. How do I connect with these partners? I'm a newbie. I have no track record.

Carl Pei 1:30:23 You have not worked in this industry.

Nikhil Kamath 1:30:25 I've not worked in this industry.

Carl Pei 1:30:25 Completely coming from outside.

Nikhil Kamath 1:30:27 Yeah.

Amit Khatri 1:30:28 I personally think, Nikhil, it's, it's really tough until, and unless, you're g- getting to a segment which is fairly new and not been cracked by all of us.

Carl Pei 1:30:36 Mm-hmm.

Amit Khatri 1:30:36 I mean, a niche space.

Nikhil Kamath 1:30:38 But see, you guys started recently, right? You started-

Carl Pei 1:30:40 I'll give you one, one example. So, uh, I did OnePlus, so I'm relatively known in the industry, right? Uh, in the electronics industry. And when we started this new company, Nothing, we wanted to make phones. Nobody wanted to make phones for us. They said, "Hey, look, look at the past 10 years."

Amit Khatri 1:30:57 Correct.

Carl Pei 1:30:57 "So many startups have come and failed, and why are you different? You raise money. They also raise money. You, you have experience. They also have experience. We're not gonna make a phone for you. Like, go away." And then we're like, "Okay, uh, we can't make a phone. Maybe we can make a earbuds first to prove ourselves, to prove the skills of our team." We go to the earbuds factories, and they also tell us to go away. They're like, "Hey, just go on Amazon. There's two, 2,000, 3,000 earbuds brands. Who are you? Like, what, what's your differentiation? What's your strategy?"

Amit Khatri 1:31:28 True.

Carl Pei 1:31:28 "How much money have you raised? Go away." Like, even w- we were shocked. Like, we thought we had some reputation in the industry that, uh, you know, some of the factories wanna work with us, but that wasn't the case.

Nikhil Kamath 1:31:40 So what changed? How did you do it?

Carl Pei 1:31:42 ... We went to the worst factory. Like, the factory, if they didn't take us on as a client, they would go out of business immediately.

Nikhil Kamath 1:31:51 In China?

Carl Pei 1:31:52 In China, because they were on the blacklist-

Nikhil Kamath 1:31:54 [chuckles]

Carl Pei 1:31:54 -of a lot of other people for quality issues.

Nikhil Kamath 1:31:55 And how did you find this factory?

Carl Pei 1:31:58 Uh, one of my co-founders, I think he... Yeah, he knew some of the salespeople in the supply chain and, and found this factory. Um, but this was a factory that had been put on the black- blacklist because of quality issues, but we had n- no other choice. Nobody wanted to work for us.

Nikhil Kamath 1:32:16 That's true-

Carl Pei 1:32:17 That's where we started.

Nikhil Kamath 1:32:17 That's true for all of us. You know, we, we had to start work with factories which were not... Less known, people don't want to work, because bigger factories don't want to touch you also. They are saying, "We are happy making Apple bosses of the universe, and we will-

Carl Pei 1:32:30 Marshall.

Nikhil Kamath 1:32:30 Marshall.

Carl Pei 1:32:30 Yeah.

Nikhil Kamath 1:32:31 But how do I, as a 20-year-old, find this factory? Like, you had somebody-

Carl Pei 1:32:34 I think you can't. Like, they won't-

Nikhil Kamath 1:32:36 No.

Carl Pei 1:32:36 They won't.

Nikhil Kamath 1:32:37 What if I just go to China and look for them?

Carl Pei 1:32:39 But they... There's no reason for them to engage. Like-

Rahul Sharma 1:32:43 Nikhil, these are the large businesses. For example, if you see the s- the size in terms of value-

Nikhil Kamath 1:32:48 Mm.

Rahul Sharma 1:32:48 ... automobile and mobile phone will be similar-

Nikhil Kamath 1:32:51 Okay

Rahul Sharma 1:32:51 ... in terms of value.

Nikhil Kamath 1:32:51 Yeah, very right. So if I reach out to one of you guys, if I happen to know you, and ask that you con- connect me to a factory, is that the way to do it?

Amit Khatri 1:33:01 If we connect also to the factories, factories has no motivation to work with you because everybody work with m- MOQ, certain processes.

Carl Pei 1:33:10 Yeah.

Amit Khatri 1:33:11 They, they, they fine-tune of... fine-tune of working with-

Carl Pei 1:33:14 I will need to pitch who you are. I will go to this, uh, founder of the factory, "Hey, um, I have a friend who-

Nikhil Kamath 1:33:19 Yeah

Carl Pei 1:33:19 ... wants to talk to you. This is this person's background and credentials. Can I make the intro or not?" So...

Rahul Sharma 1:33:26 I have a recent example going on right now. So some... So right now, we have this technology of making connected glasses.

Nikhil Kamath 1:33:35 Right.

Rahul Sharma 1:33:35 'Cause we feel that's the future. That's where-

Nikhil Kamath 1:33:37 Right

Rahul Sharma 1:33:38 ... my pie is going to move. We are trying to find out who are the right brands-

Nikhil Kamath 1:33:41 Mm

Rahul Sharma 1:33:42 ... who can do these glasses.

Nikhil Kamath 1:33:44 Mm.

Rahul Sharma 1:33:45 And established brands in the glasses space-

Nikhil Kamath 1:33:49 Yeah

Rahul Sharma 1:33:49 ... right now, we're just pitching it to them, that, "Hey, look-

Nikhil Kamath 1:33:52 Like meta glasses?

Rahul Sharma 1:33:53 Exactly same.

Nikhil Kamath 1:33:54 Right.

Rahul Sharma 1:33:54 Exactly the same. So with w- actually, with Meta.

Nikhil Kamath 1:33:58 Mm.

Rahul Sharma 1:33:58 Along with Meta.

Nikhil Kamath 1:34:00 When you say along with Meta, what do you-

Rahul Sharma 1:34:01 Meta, as Meta, the operating systems, for example, the whole AI is from Meta. So, which... So, for example, they have done the same partnership with, uh, Luxottica-

Nikhil Kamath 1:34:09 Right

Rahul Sharma 1:34:10 ... Ray-Ban.

Nikhil Kamath 1:34:10 Right.

Rahul Sharma 1:34:11 Similar.

Nikhil Kamath 1:34:13 Do you guys think there's an opportunity there? The form is changing, and it moves from cell phone to something else.

Amit Khatri 1:34:21 No, I think, interestingly, our industry is evolving every decade. So, like, nobody thought that Nokia could be disrupted, for an example, so any of our devices could be disrupted, and form factors are definitely changing. Uh, people are working aggressively on glasses, uh, so that is one form factor to look into. But like he said, it's, it's a game of people who have... For glasses, I think all mobility is working. Entire mobile, mobile brands in the world are working towards that. So it is- it becomes very difficult for a young company to still compete.

Rahul Sharma 1:34:53 Glasses, you can do. Glasses, you can do.

Nikhil Kamath 1:34:56 So, so you, you got one, [clears throat] one gap?

Carl Pei 1:35:00 I think there-

Rahul Sharma 1:35:01 No, there is, because, see, look at the glasses industry. Last year, Meta with Luxottica, and these are public numbers, they sold two million glasses. Two million.

Nikhil Kamath 1:35:11 Mm-hmm.

Rahul Sharma 1:35:12 And the number, what has been projected in, in the next four years is around 30 million. That's a CAGR of, let's say, more than 43, 40, 45% on an-

Nikhil Kamath 1:35:22 Mm

Rahul Sharma 1:35:23 ... annual basis, right? And, uh, and since we've been working on that, so the tech is... So earlier, the glasses came with only speaker here.

Nikhil Kamath 1:35:33 Yeah, yeah.

Rahul Sharma 1:35:34 Right?

Nikhil Kamath 1:35:34 Old... Yeah, yeah.

Rahul Sharma 1:35:35 Yeah. Gen two, there was a camera.

Nikhil Kamath 1:35:38 Yeah.

Rahul Sharma 1:35:41 In, let's say, Gen Three, with this whole AI engine coming in there. Gen Four, you have a heads-up display.

Nikhil Kamath 1:35:49 Correct.

Rahul Sharma 1:35:50 Now, once you have a heads-up display, then whatever, for example, is going on my cell phone, I have a display here.

Nikhil Kamath 1:35:56 On the frame?

Rahul Sharma 1:35:57 No, no, no, not on the frame. It's a heads-up display like you have in your cars.

Nikhil Kamath 1:35:59 You're projecting onto a wall or something?

Rahul Sharma 1:36:01 Yes. No, no, not on the wall.

Nikhil Kamath 1:36:02 Well, you were saying like cars-

Rahul Sharma 1:36:03 It's in a car

Nikhil Kamath 1:36:04 ... speedometer.

Amit Khatri 1:36:04 Speedometer, yeah.

Rahul Sharma 1:36:05 Yeah.

Amit Khatri 1:36:05 That's a heads-up display.

Rahul Sharma 1:36:06 Yeah.

Amit Khatri 1:36:06 You can see. So here, I can see. So today, for example, if it is in a, let's say, black, you know, black and white. Tomorrow, it will be all colored. It will evolve. And then, for example, if you're watching your Instagram reels-

Nikhil Kamath 1:36:20 Mm

Rahul Sharma 1:36:20 ... you're just clicking it.

Nikhil Kamath 1:36:22 Mm.

Rahul Sharma 1:36:22 Just sitting, and then you are not taking out your phone because rest... See, in your phone, you have a display-

Nikhil Kamath 1:36:27 Mm.

Rahul Sharma 1:36:27 -you have speaker-

Nikhil Kamath 1:36:28 Mm

Rahul Sharma 1:36:29 ... mic, and a camera.

Nikhil Kamath 1:36:31 Mm.

Rahul Sharma 1:36:31 All things are solved. Then why do you need to take out your phone?

Nikhil Kamath 1:36:36 Do you think that'll be the future of form, cell phone will move to glasses?

Rahul Sharma 1:36:40 See, nobody, nobody can just firmly say that, "Okay, this is..." Although, for example, Zuckerberg has said that this is going to be.

Nikhil Kamath 1:36:46 But he said the Oculus and all of those things were the form as well for a long time, which didn't play out, right?

Rahul Sharma 1:36:51 Correct.

Nikhil Kamath 1:36:52 Mm.

Rahul Sharma 1:36:52 So as I s- see, there's nothing right, nothing wrong. You have to go out in the market and test it out-

Nikhil Kamath 1:36:58 Mm

Rahul Sharma 1:36:59 ... right. But looking at the tech right now, that what exactly is it going to solve, I think I've seen the, all the new glasses coming up. I seriously feel that this will be the, the form factor to watch out for.

Nikhil Kamath 1:37:12 Right.

Rahul Sharma 1:37:13 Yes. And there, so if somebody new watching this wants to get into the industry, this is the industry.

Nikhil Kamath 1:37:19 Right.

Carl Pei 1:37:19 I, I have a s- different approach. If somebody was young and watching this and wanting to get into consumer electronics, I would urge them to first become a content creator.

Nikhil Kamath 1:37:31 Bang on.

Rahul Sharma 1:37:31 Marketing.

Nikhil Kamath 1:37:32 100%.

Carl Pei 1:37:32 Because the barrier to entry is very low.

Nikhil Kamath 1:37:34 Yeah, it is.

Carl Pei 1:37:35 Anybody can do it, and that's the arbitrage opportunity now. Like, the, the millennials and the older people, they, they're, they're gonna have a harder time to learn the latest algorithms, latest trends.

Nikhil Kamath 1:37:45 Hundred percent.

Carl Pei 1:37:46 If you do the content well, like MrBeast, like, now you can do, do anything.... you can make chocolate, you can make a TV show on Amazon. When you have the traffic, you can- you have leverage to, to sell any product. Then when I do the intro to the factory, they go, "Oh, it's MrBeast, of course."

Amit Khatri 1:38:03 Yeah.

Carl Pei 1:38:03 "If it's just some random kid, it's, it's impossible."

Amit Khatri 1:38:06 But I, I feel there are n- very niche spaces which are coming up, which none of us are solving as bigger companies. When you look at our space, this product, hearing aids is a decent space, but right now it's, like, 150,000 or 1 lakh 50,000 rupees or $2,000, there is a hearing aid. It looks ugly. I see industry working in a space which is over-the-counter hearing aids, way affordable, looking better. That is one market. And when you look at our category variables, I see... Now, penetration has happened in variables.

Carl Pei 1:38:42 Mm-hmm.

Amit Khatri 1:38:42 Like, as parents, we have used, Rahul. Now, the problem is we have aging parents. We need a device for them which could monitor their health. And more importantly, we live in urban cities. We have kids. And you won't believe, I get a message from five people every day, "Do you have a kids' watch?" Because none of us are looking at this space. The space stands at zero.

Nikhil Kamath 1:39:03 You're saying for kids and senior monitoring?

Amit Khatri 1:39:05 I mean, yeah, two, two spaces, because, see, first market edu-

Nikhil Kamath 1:39:08 But can't a Apple Watch do that?

Amit Khatri 1:39:10 Well, Apple Watch does it, but it's 50,000 rupees. Will India price point get solved with 50,000 bucks? India would need a watch for a parent maybe at 8 to 10,000 rupees, not, not a 50,000, 100%.

Rahul Sharma 1:39:24 So coming back to his point of, uh, hearing aids, again, anybody watching, there's the space to get to disrupt. Because all the hearing aids, if you see, are, like, uh, 1 lakh rupees, 2 lakh rupees-

Amit Khatri 1:39:36 2 lakh rupees

Rahul Sharma 1:39:36 ... close to 3 lakh rupees. Or, like, I, I, you know, went to buy for my dad to a doctor.

Nikhil Kamath 1:39:41 Mm.

Rahul Sharma 1:39:42 It's 1.5 lakh rupees hearing aid.

Nikhil Kamath 1:39:46 Mm.

Rahul Sharma 1:39:46 And I said, "Do you have a better one?" He said, "Yeah, it's 2 lakh rupees." I said, "What is the difference?" "Software difference-

Nikhil Kamath 1:39:52 Mm

Rahul Sharma 1:39:52 ... on phone."

Amit Khatri 1:39:53 Mm.

Nikhil Kamath 1:39:53 Mm.

Rahul Sharma 1:39:53 "With this, we give you three more extra features which you can unlock."

Nikhil Kamath 1:39:56 Mm.

Carl Pei 1:39:56 It's very uncompetitive-

Rahul Sharma 1:39:58 Yeah

Carl Pei 1:39:58 ... market.

Nikhil Kamath 1:39:58 It's like a-

Rahul Sharma 1:39:58 I said, "Why?" They say, "No, no, with these features, you know, you can be... you know, you'll be able to understand if the voice is coming from behind or front," all these things.

Nikhil Kamath 1:40:07 Right.

Rahul Sharma 1:40:07 Now, why... Then I went into the why these hearing aids are expensive.

Nikhil Kamath 1:40:10 Mm.

Rahul Sharma 1:40:11 Because back then-

Nikhil Kamath 1:40:13 Mm

Rahul Sharma 1:40:13 ... putting something in a small form factor was expensive. Was expensive at that time-

Nikhil Kamath 1:40:19 Mm

Rahul Sharma 1:40:19 ... but not today.

Amit Khatri 1:40:21 I think, no, it's not about this also, Rahul. So cost would be cheaper for the manufacturer who is selling it brand, but it's just about only one or two brands doing that business, selling at maybe 80%, 90% gross margins.

Rahul Sharma 1:40:31 There's one company, I'm just forgetting the name.

Amit Khatri 1:40:33 They are the majority market share, 80%.

Rahul Sharma 1:40:34 They own the three big brands-

Amit Khatri 1:40:35 Yeah, yeah

Rahul Sharma 1:40:36 ... in the world.

Amit Khatri 1:40:36 Yeah, yeah, yeah.

Nikhil Kamath 1:40:37 Hearing aids?

Rahul Sharma 1:40:37 Yeah.

Amit Khatri 1:40:38 Yeah.

Rahul Sharma 1:40:38 This one company has bought out all others-

Amit Khatri 1:40:40 Yeah

Rahul Sharma 1:40:40 ... three to four big brands in the world.

Nikhil Kamath 1:40:42 Is it a big market?

Amit Khatri 1:40:43 It's a narrow, not big.

Nikhil Kamath 1:40:45 Uh.

Amit Khatri 1:40:46 But, uh-

Nikhil Kamath 1:40:47 Is there another advice, pick narrow markets where the large incumbents are not going after?

Carl Pei 1:40:52 Yes, if you're passionate about it.

Amit Khatri 1:40:54 Yeah. Passion is, has to keep you going.

Nikhil Kamath 1:40:56 Explain, like, why would I be passionate about hearing aids?

Carl Pei 1:40:59 That's what I mean. If you're not passionate about a business you're starting... Like, businesses are tough.

Nikhil Kamath 1:41:04 Mm.

Carl Pei 1:41:04 There's some good days and a lot of-

Rahul Sharma 1:41:05 Yeah

Carl Pei 1:41:05 ... terrible days. So if you're not really in love with what you're doing, it's hard to persevere when it's, when it gets really difficult.

Nikhil Kamath 1:41:12 But can I be passionate about hearing aids?

Amit Khatri 1:41:14 Also-

Carl Pei 1:41:15 Some people are passionate about it, for sure.

Amit Khatri 1:41:16 Some people are, by the way. They are trying to solve a real problem.

Nikhil Kamath 1:41:18 Mm.

Rahul Sharma 1:41:19 No, we are, I mean, if-

Amit Khatri 1:41:20 And if somebody is, like-

Rahul Sharma 1:41:21 If somebody wants to do it, you know, you know, crack the code, go out of it-

Nikhil Kamath 1:41:24 Mm

Rahul Sharma 1:41:24 ... we... So for example, you're saying you want to introduce someone and all. I mean, we can introduce to them all the chipset players, you know, all whatever-

Amit Khatri 1:41:32 Because nobody's there in that space-

Rahul Sharma 1:41:33 Whatever the components we go

Amit Khatri 1:41:34 ... that's available for somebody to take on.

Rahul Sharma 1:41:36 And we are ready to fund them.

Amit Khatri 1:41:37 Right, 100%.

Nikhil Kamath 1:41:39 Think I am not interviewing you guys. Think I'm a 20-year-old boy sitting in a room. I've had the great opportunity

Nikhil Kamath 1:41:47 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?

Rahul Sharma 1:42:01 Uh, we have already given the cards, for example. [chuckles]

Nikhil Kamath 1:42:04 Uh.

Rahul Sharma 1:42:04 You know, the glasses-

Nikhil Kamath 1:42:05 Uh

Rahul Sharma 1:42:05 ... hearing aids.

Nikhil Kamath 1:42:06 Uh.

Rahul Sharma 1:42:08 Um.

Nikhil Kamath 1:42:08 Okay, what else?

Amit Khatri 1:42:08 What nots, I'll be very clear. If,

Nikhil Kamath 1:42:10 Mm.

Amit Khatri 1:42:10 if somebody's trying to go to a commodity market-

Nikhil Kamath 1:42:12 Mm

Amit Khatri 1:42:13 ... it's no go. It's a race to bottom. There is no winning there.

Nikhil Kamath 1:42:15 What is a commodity?

Amit Khatri 1:42:17 I mean, let's say somebody says, "I want to do a earbud which is 1,500 bucks."

Nikhil Kamath 1:42:21 Mm.

Amit Khatri 1:42:21 No go.

Rahul Sharma 1:42:22 No go.

Amit Khatri 1:42:22 How will you win? I mean-

Rahul Sharma 1:42:23 Yeah

Amit Khatri 1:42:23 ... what's your right to win-

Rahul Sharma 1:42:24 Yeah

Amit Khatri 1:42:24 ... when there's overcrowded market and when large players are there, so...

Nikhil Kamath 1:42:28 I'm a content creator. I have distribution. Let's add that.

Amit Khatri 1:42:31 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.

Nikhil Kamath 1:42:41 Mm.

Amit Khatri 1:42:41 Every category-

Nikhil Kamath 1:42:41 Didn't somebody, a content creator-

Amit Khatri 1:42:43 Yeah

Nikhil Kamath 1:42:43 ... recently sell a watch-

Amit Khatri 1:42:44 Yeah

Nikhil Kamath 1:42:44 ... and he sold a lot?

Amit Khatri 1:42:45 Yeah.

Nikhil Kamath 1:42:46 What was his name?

Amit Khatri 1:42:47 Uh, Sh- uh, Shlok, na?

Nikhil Kamath 1:42:49 Uh.

Amit Khatri 1:42:49 Anark, layers.

Nikhil Kamath 1:42:50 Yeah.

Amit Khatri 1:42:51 Shlok.

Nikhil Kamath 1:42:52 Yeah, yeah, yeah.

Amit Khatri 1:42:52 Tech Burner.

Nikhil Kamath 1:42:52 Yeah, yeah.

Amit Khatri 1:42:54 So they did it, but if you look into it, uh-

Carl Pei 1:42:56 What if the, um, the kid is, uh, 10 times or 100 times bigger than, than the Tech Burner?

Amit Khatri 1:43:03 MrBeast has done that, but I'm just saying tech is very different. Tech-

Nikhil Kamath 1:43:06 Mm

Amit Khatri 1:43:06 ... they failed because the product was not up to the mark. Uh, they were new in the town. It's not like selling T-shirt. You can just stitch it-

Carl Pei 1:43:14 Mm

Amit Khatri 1:43:14 ... and sell it, and there is no tech to it. The same factory makes a 300 rupees T-shirt and a 30,000 rupee T-shirt also. Tech is not like that. Like, one piece-

Nikhil Kamath 1:43:22 But if you are outsourcing the tech, the production, if you're going to a co-packer almost-

Amit Khatri 1:43:26 No, it's not like this business. Uh, uh, so, like all of us, we choose what components to get into, that we'll get into it. It's a super customized business. Some of the software layer are being customized at our level in our teams. Some are outsourced. Am I right, Carl?

Carl Pei 1:43:42 Mm, yes.

Amit Khatri 1:43:43 And then we design a product, and then it comes out. It's like a CPU.

Nikhil Kamath 1:43:47 Mm.

Amit Khatri 1:43:47 It's just not you buy from it. You choose specific components, run software on it, develop software. It's not that easy. That's why companies are failing.

Carl Pei 1:43:56 ... Th- so, uh, I had the same, uh, idea before trying this business. There's a bunch of factories, they all know how to make it. We just go and order, and then-

Nikhil Kamath 1:44:04 Mm-hmm

Carl Pei 1:44:04 ... just pay them, it shows up. Done. Um, that can't be further away from the truth. Like, these factories, sure, they have the common models that you can buy off the shelf, but everybody can buy those.

Nikhil Kamath 1:44:15 Yeah.

Carl Pei 1:44:15 And they don't have the best engineers. Like, the best engineers, they're not gonna work for a factory. They're gonna work for Apple or Samsung or, like, a brand, right? So they don't have good engineering.

Nikhil Kamath 1:44:23 So what is happening in China, and what is happening at Apple? Ex- explain the engineering process.

Rahul Sharma 1:44:28 We just were discussing-

Nikhil Kamath 1:44:30 Uh

Rahul Sharma 1:44:30 ... we went on a break-

Nikhil Kamath 1:44:31 Uh

Rahul Sharma 1:44:31 ... about the camera.

Carl Pei 1:44:32 Yeah.

Rahul Sharma 1:44:32 Yeah.

Carl Pei 1:44:33 Yeah, camera is a great example.

Nikhil Kamath 1:44:34 Mm.

Carl Pei 1:44:35 Like, if you wanna create, um... There's so many fields within these products, right? There's a radio antenna, there's, uh, industrial design, there's camera, there's software. It's like so many different things. Everything requires a lot of investment and time and energy to do it well. So I think maybe taking a step back, the one piece of advice is to really also respect whatever new thing you're doing. Like, okay, now we're making earbuds. Let's learn about how to make earbuds, how everything works. Well, now we're doing camera tuning, let's really learn about how that works. So if we just, uh, have a very simplistic view and outsource it to other people, we don't even know what's, what the, what the underlying, uh, principles are, it's, it's gonna be very bad. So just for camera, um, we've been struggling with camera. This year it got a lot better. It's not that we're not smart enough, but it's... The camera's a very, like, hardcore resource investment. The way it works is you make the phone recognize the scene. The scene could be, uh, two people sitting here, it could be, uh, nighttime, it could be city.

Rahul Sharma 1:45:37 Fruits.

Carl Pei 1:45:38 Fruits. The more scenes you can define, the better your pictures will be. The more you can define, then each scene will have its own tuning. The team will tune it differently depending on the scene to make it as beautiful as possible for this specific scene. So if I have a, if I have a big team, I can define a lot of different scenes, so then there's a very high likelihood that the phone will tune it in a way that's nice. If I have a small team, I can only, only define a few scenes. So if I only have a few scenes, then I'll miss a lot of the long-tail potential use cases for the camera, and customers are not gonna be happy.

Rahul Sharma 1:46:11 Yeah, I think identifying gaps-

Carl Pei 1:46:12 Yeah

Rahul Sharma 1:46:12 ... and as I said, eh, or, or you, uh, you know, in terms of passion, you were saying. So, s- still so many categories are there.

Carl Pei 1:46:20 Yeah.

Rahul Sharma 1:46:20 Example-

Nikhil Kamath 1:46:21 Uh.

Rahul Sharma 1:46:21 Let's take example of Dyson.

Carl Pei 1:46:23 Right?

Rahul Sharma 1:46:23 Can you disrupt?

Nikhil Kamath 1:46:23 Bang on. So if you look at India as a market, there is no Dyson.

Carl Pei 1:46:27 Yeah.

Nikhil Kamath 1:46:27 It's just Dyson, which is, like, 40,000 bucks, and there is Bajaj to buy.

Rahul Sharma 1:46:31 No, so there is a company called SharkNinja.

Carl Pei 1:46:33 Mm, yeah.

Rahul Sharma 1:46:34 They're number one in USA.

Nikhil Kamath 1:46:36 There?

Rahul Sharma 1:46:36 Disrupted Dyson completely.

Nikhil Kamath 1:46:38 By Dyson, do you mean vacuum cleaner, hair blower?

Rahul Sharma 1:46:40 Multiple things, yeah.

Carl Pei 1:46:41 Home, home.

Rahul Sharma 1:46:41 Yeah.

Nikhil Kamath 1:46:42 See, if you look at it, there is no young brand in home. Look at the customer.

Rahul Sharma 1:46:46 Mm.

Nikhil Kamath 1:46:47 Our parents grew up buying Bajaj.

Rahul Sharma 1:46:49 Mm.

Nikhil Kamath 1:46:49 We aspire to buy Dyson, but Dyson is too expensive. So look at that 25 to 35 age group, what they would buy.

Rahul Sharma 1:46:56 So, for example, if, if I have to use an analogy, if Dyson is the Mercedes-Benz-

Nikhil Kamath 1:47:00 Yeah.

Carl Pei 1:47:01 Mm

Rahul Sharma 1:47:01 ... we would need a-

Nikhil Kamath 1:47:02 No Toyota is there

Rahul Sharma 1:47:02 ... yeah, a Toyota, a Honda, or a Hyundai.

Nikhil Kamath 1:47:05 We have Maruti.

Carl Pei 1:47:07 Mm.

Rahul Sharma 1:47:07 So-

Nikhil Kamath 1:47:08 Maruti is Bajaj?

Carl Pei 1:47:09 I mean, those kind of companies, yeah.

Nikhil Kamath 1:47:11 Mm.

Rahul Sharma 1:47:12 So, you know, these are the segments, so you have to really identify those gaps-

Carl Pei 1:47:17 Right

Rahul Sharma 1:47:17 ... and say, "Yes, is there a market?" And I think-

Nikhil Kamath 1:47:20 But also-

Rahul Sharma 1:47:21 And if you have a passion and all, you will figure out a way, you know, find out the right people, uh-

Carl Pei 1:47:27 Maybe take a step-by-step approach.

Nikhil Kamath 1:47:28 Yeah.

Carl Pei 1:47:28 Like, instead of starting your own company, work for somebody else.

Nikhil Kamath 1:47:32 Yeah.

Carl Pei 1:47:32 Like, like me.

Nikhil Kamath 1:47:32 That is important, learn it.

Carl Pei 1:47:34 Mm. If- there are so many, uh, mistakes you can make in, in our industry. If I didn't do it, like, once before, the chances of failure would have been way higher.

Nikhil Kamath 1:47:46 It's like eight to nine months of a cycle when you're committed, and when you're committed, you're committed with few million dollars, you can't get out.

Rahul Sharma 1:47:53 Mm.

Nikhil Kamath 1:47:54 Carl, you've said the easiest way to differentiate is design, in a bunch of interviews.

Carl Pei 1:48:01 Mm-hmm.

Nikhil Kamath 1:48:02 Can't I look at the same devices but relook design alt- altogether?

Carl Pei 1:48:07 And do what design?

Nikhil Kamath 1:48:08 Like, relook my design philosophy altogether. Why do earbuds have to look like this? What if I ch- change the form factor completely?

Carl Pei 1:48:16 Uh, then there's PMF risk.

Nikhil Kamath 1:48:19 What is PMF risk?

Carl Pei 1:48:20 Product-market fit.

Rahul Sharma 1:48:21 Product-market fit.

Carl Pei 1:48:21 ... 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.

Nikhil Kamath 1:48:50 But there's no way to test it?

Carl Pei 1:48:53 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.

Nikhil Kamath 1:49:00 But I think besides mock-up, it's all about functionality, usage, so that also plays a bigger role.

Carl Pei 1:49:05 Mm.

Nikhil Kamath 1:49:06 So I think we don't want to change people behaviors the way they are doing, just little changes.

Carl Pei 1:49:11 It's a, it's a different, uh, business strategy. I think we're in the fast follower strategy or late mover strategy.

Nikhil Kamath 1:49:17 Explain?

Carl Pei 1:49:19 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.

Rahul Sharma 1:50:24 So just asking Carl on- Yeah, yeah. So Carl, on the phones, for example, where do you think the-- some disruption can happen?

Carl Pei 1:50:34 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?

Rahul Sharma 1:51:00 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.

Carl Pei 1:51:18 Yeah.

Rahul Sharma 1:51:18 Or maybe a triple screen.

Carl Pei 1:51:19 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.

Amit Khatri 1:51:27 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.

Carl Pei 1:51:37 Yeah.

Amit Khatri 1:51:37 So he will also not reduce the price.

Carl Pei 1:51:39 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.

Amit Khatri 1:51:50 I, I think the next differentiation for all of us would be through software only.

Nikhil Kamath 1:51:55 But aren't you using one of two softwares which are in the market and operating your devices on that?

Amit Khatri 1:52:03 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.

Nikhil Kamath 1:52:17 Right.

Amit Khatri 1:52:18 And what I mean is, more softwares would come in, like, uh, could I fine-tune my audio based on my hearing capabilities of my ear, like Apple is doing it now? It's pure software.

Nikhil Kamath 1:52:30 Mm.

Amit Khatri 1:52:30 Or could I have AI capabilities in this so that I could interact it? A lot of companies are working on a friend kind of a concept.

Nikhil Kamath 1:52:37 Mm.

Amit Khatri 1:52:37 So it's all software, what I see is happening, and same gonna happen on the, uh, earbuds-

Carl Pei 1:52:42 Yeah, today we're based on Android, but I, I see some, uh, disruption opportunities to become the next Android.

Nikhil Kamath 1:52:48 Like?

Carl Pei 1:52:50 I think the... There's, there's a couple of trends, right? Um, the one trend is, if you look at the current, uh, big OSs, iOS and Android, they're very successful already. Android has three billion plus users. iOS has one billion plus users. So they can't really change the product that much. If you change the product, a lot of people are gonna be confused, because they have too many users, and it's very profitable. They're making a lot of money on the software and the services. I don't know the number for India, but, like, in the US, Apple makes a hundred dollars per year on each iPhone user, just on non-hardware, uh, stuff. It's very high margin. Um, very profitable, very big. Now, the disruption moment is with Gen AI and large language models.

Amit Khatri 1:53:35 Correct.

Carl Pei 1:53:36 If you look at, uh, recent news around Apple, they announced, uh, Apple Intelligence at WWDC, and still today, almost a year later, there's, there's nothing-

Amit Khatri 1:53:46 It's still the same [chuckles]

Carl Pei 1:53:47 ... Nothing there to use. Now they're reshuffling their management team, and this is, like, four years after ChatGPT. It's, it, it took a long time to, to implement this. So I think, one, they're too big and too successful. Uh, so then the question is, like, how do you disrupt? Like, what is their biggest moat? I think for, at least for smartphones, their biggest moat is their developer, uh, ecosystem, right? If today we launch our own OS based on Android or a fork of, fork of Android, we don't have any apps on the phone, no app store, no apps, yeah, nobody's gonna buy the product. Like, I want to use my apps. But again, if you look at AI, there's a disruption moment for app development because now with AI coding tools, you just need to write what app you want, and then it shows up. In the future, you can just speak what app you want into the phone, and that app shows up. So then that gives a smaller company like us the ability to compete with, uh, iOS, which has, I don't know, a million, two million apps already. But we can empower every normal person to also be an app developer. If you have an idea, you just speak your idea into the product. Therefore, we can also quickly, um, develop our ecosystem of, uh, developers and apps. So I think that's the main opportunity that I see, that a younger, more nimble company can, can navigate a changing world, uh, way quicker. And the big moment that's enabling all of this is the advancements in AI.

Nikhil Kamath 1:55:19 How else can AI present opportunities if I were to want to build something in consumer electronics as a twenty-five-year-old?

Carl Pei 1:55:28 It's kinda like, um, it's kinda like the personal computer. The example of it enables you to manifest your creativity into reality. Um, the personal computer allows you to go to Photoshop, GarageBand, iMovie. Now, like, creating stuff is easier than ever. Like, we talked about creating apps. Uh, you can create graphics, create advertising, create content, create product design, code. It's really, uh, in one way, lowering the bar to, to creativity being manifested.

Rahul Sharma 1:56:00 I think that is one segment which will again, a, a great idea, you know, for all the youngsters.... for AI, in terms of training the models, you know, we all see that you will need these many GPUs-

Nikhil Kamath 1:56:12 Yeah.

Rahul Sharma 1:56:12 -you know, hundreds of GPUs, thousands of GPUs to train your models and all. I think all those things are gonna, you know, will change. There will be a time where you will be able to train the largest of the models-

Nikhil Kamath 1:56:23 Mm-hmm.

Rahul Sharma 1:56:23 -using one single server. You will not need a farm of servers.

Nikhil Kamath 1:56:27 Mm-hmm.

Rahul Sharma 1:56:27 Uh, we have seen a trailer in form of DeepSeek already, and, uh, I think very soon we'll be... So this, what, you know, what is it implies that?

Nikhil Kamath 1:56:39 Mm-hmm.

Rahul Sharma 1:56:39 How it is going to change everything. So this means that the access to technology-

Nikhil Kamath 1:56:43 Mm-hmm.

Rahul Sharma 1:56:44 -will be massified.

Nikhil Kamath 1:56:45 Mm-hmm.

Rahul Sharma 1:56:46 Right now, it is with only few people who are working on these LLMs, for example, running 405 billion tokens, or now the new model, seven, 780 billion tokens.

Nikhil Kamath 1:56:55 Mm-hmm.

Rahul Sharma 1:56:56 Which only big server farms can do. But once there is a technology wherein within a single server you'll be able to, you know, you can run your models-

Nikhil Kamath 1:57:06 Mm-hmm.

Rahul Sharma 1:57:07 -I think then all the, all the youngsters, and they are way more creative, they will be able to come up with, for example, an operating system. They can just come up with an OS and then, and figure it out. Maybe then find a MrBeast and say, "Okay, hey, I have this."

Nikhil Kamath 1:57:24 Mm.

Rahul Sharma 1:57:24 And then... So, uh, but there will be numerous opportunities coming out of that once it massified.

Nikhil Kamath 1:57:31 One trend that I see in the market is the youth of today does not want to buy from the corporations of yesterday.

Nikhil Kamath 1:57:40 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.

Carl Pei 1:58:08 I think there's an opportunity, but I think you would ne- first need to, uh, start in a different category.

Nikhil Kamath 1:58:13 Yeah.

Carl Pei 1:58:14 Like, make a fashion brand, make that successful.

Nikhil Kamath 1:58:16 Yeah.

Carl Pei 1:58:16 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.

Nikhil Kamath 1:58:29 That's an interesting idea. So you're saying start a independent design-themed brand, start elsewhere, succeed, and then transition into this?

Carl Pei 1:58:42 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.

Amit Khatri 1:58:51 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."

Nikhil Kamath 1:59:26 Mm.

Amit Khatri 1:59:26 So maybe our entry also was not on day one here. We learned consumer from a basic business.

Nikhil Kamath 1:59:32 Mm.

Amit Khatri 1:59:33 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?

Nikhil Kamath 1:59:42 Mm.

Amit Khatri 1:59:42 Like, what customer you want to-

Nikhil Kamath 1:59:45 I'm asking you that question. I don't have data like you do.

Amit Khatri 1:59:47 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.

Nikhil Kamath 2:00:01 Mm.

Amit Khatri 2:00:01 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.

Nikhil Kamath 2:00:19 Mm.

Amit Khatri 2:00:19 So as founders or whosoever, young people want to start, they need to be very clear what segment-

Nikhil Kamath 2:00:25 Mm

Amit Khatri 2:00:25 ... they are trying to build, because different segment, when you talk about design-

Nikhil Kamath 2:00:28 What if I come to you with a blank slate, what segment would you recommend I build in?

Amit Khatri 2:00:32 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.

Nikhil Kamath 2:00:56 Mm.

Amit Khatri 2:00:57 And that always happens at somewhere little above, not, not to the basics. You're not solving basics of anyone right now.

Nikhil Kamath 2:01:03 How does India build a supply chain?

Rahul Sharma 2:01:05 Great. So it's a process.

Nikhil Kamath 2:01:09 Mm.

Rahul Sharma 2:01:10 So the process is that you start with, uh,

Rahul Sharma 2:01:13 initially, you start with EMS.

Nikhil Kamath 2:01:15 EMS is?

Rahul Sharma 2:01:16 EMS is the electronic manufacturing services-

Nikhil Kamath 2:01:18 Mm.

Rahul Sharma 2:01:18 -that you start the EMS process. Then you start getting the design-

Nikhil Kamath 2:01:26 Mm

Rahul Sharma 2:01:26 ... out there in country. Then after design, you start working on the supply chain, the component ecosystem.

Nikhil Kamath 2:01:32 Mm.

Rahul Sharma 2:01:33 Right. So this is, this all is a process one by one. I mean-

Nikhil Kamath 2:01:37 If I'm, I've, I'm 25, and I want to start a component company-

Rahul Sharma 2:01:41 Uh.

Nikhil Kamath 2:01:42 -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?

Rahul Sharma 2:01:50 No, so you can do that. So there is so much of material which goes inside.

Nikhil Kamath 2:01:55 Mm.

Rahul Sharma 2:01:55 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.

Nikhil Kamath 2:02:12 Hmm.

Rahul Sharma 2:02:13 Probably there is maybe somebody has to find out and get into that.

Nikhil Kamath 2:02:18 Hmm.

Rahul Sharma 2:02:19 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-

Nikhil Kamath 2:02:39 Is that an opportunity for me? I think US will-

Rahul Sharma 2:02:42 So-

Nikhil Kamath 2:02:42 -in the tariff world, not buy from China like they once did.

Rahul Sharma 2:02:45 Components is a huge opportunity. So, for example, now India is projecting a market of $500 billion by 2030.

Nikhil Kamath 2:02:51 Hmm.

Rahul Sharma 2:02:51 It's a huge market.

Nikhil Kamath 2:02:52 Hmm.

Rahul Sharma 2:02:53 60% of that is components.

Nikhil Kamath 2:02:55 Hmm.

Carl Pei 2:02:55 And we're also incentivized to use the locally manufactured components.

Nikhil Kamath 2:02:59 If manufacturing is coming here, 100% components will come here, and like batteries-

Rahul Sharma 2:03:03 That's an opportunity, too.

Nikhil Kamath 2:03:04 100%.

Rahul Sharma 2:03:05 So-

Nikhil Kamath 2:03:05 Like, I want to make money.

Rahul Sharma 2:03:06 Yeah.

Nikhil Kamath 2:03:06 I'm 25 in this industry. Component is part-

Amit Khatri 2:03:09 EMS is a... I think next 10 years is EMS.

Rahul Sharma 2:03:12 So, and the component PLI scheme is coming. Maybe by the time this podcast is out, the scheme will be announced.

Nikhil Kamath 2:03:17 How do I go about starting that? Let's say, a EMS company, a EMS manufacturing.

Rahul Sharma 2:03:22 Great. So take a mobile phone-

Nikhil Kamath 2:03:23 Hmm.

Rahul Sharma 2:03:24 ... Get into each and every component.

Nikhil Kamath 2:03:26 Hmm.

Rahul Sharma 2:03:26 There are so many. There are... So, in a mobile phone, there are, let's say, 700, 800 components.

Nikhil Kamath 2:03:31 Hmm.

Rahul Sharma 2:03:31 Maybe in his phone, maybe it will be more.

Nikhil Kamath 2:03:32 Hmm.

Rahul Sharma 2:03:32 iPhone will be way more, right? Get into that.

Nikhil Kamath 2:03:36 How do I find that out? Like, I want to know... I'm assuming US, China are gonna hate each other for some time more.

Rahul Sharma 2:03:42 Hmm.

Nikhil Kamath 2:03:44 Apple phones are made in the US. They can't buy that particular product that they have been from China anymore. How do I figure out what that component is, and then how to build it?

Rahul Sharma 2:03:54 Just tear it down.

Nikhil Kamath 2:03:55 Hmm.

Rahul Sharma 2:03:56 Nikhil, these days it is actually simpler. You know, you go on ChatGPT-

Nikhil Kamath 2:03:59 Yeah. There are sorry, sites on internet where you could just see tear down of every phone.

Rahul Sharma 2:04:03 In tear down, you can find out, you know, what are the components, and then you find out, okay, how many components are there in India. Go on the export list, import list, that what all are getting in the country.

Nikhil Kamath 2:04:11 Hmm.

Rahul Sharma 2:04:12 Right? What is the volume? What is the... And these days you can get access to all the customs data easily.

Amit Khatri 2:04:17 Yeah.

Nikhil Kamath 2:04:17 Hmm.

Rahul Sharma 2:04:17 So, um, I think a huge opportunity.

Carl Pei 2:04:20 You should also work at a EMS to get some, uh, industry knowledge.

Nikhil Kamath 2:04:24 Experience.

Carl Pei 2:04:25 Experience.

Nikhil Kamath 2:04:26 Hmm.

Amit Khatri 2:04:26 There is somebody working with him for a year, he would know everything, where does opportunity lie.

Nikhil Kamath 2:04:31 Hmm. How big is the incentive for someone like Carl? Say, you're selling Nothing phones in India. You source from me in Bangalore versus a Chinese component manufacturer. Is the incentive enough to warrant the change in price?

Carl Pei 2:04:47 Um, so right now, we have, we have to pay duties on components that are sourced from, uh, other countries like China. So the more we can source locally, the more we can lower the prices of our product, then be more competitive on the market. So we're very incentivized, and if we're able to tap into PLI, and I think the PLI regulation will also be, uh, more and more requiring of the brands to source locally-

Nikhil Kamath 2:05:11 Mm-hmm

Carl Pei 2:05:11 ... and they will raise the bar every single year. Um, we're very incentivized to, to source locally. As a business, we just need to make the best decision-

Nikhil Kamath 2:05:21 Okay, sir

Carl Pei 2:05:21 ... for, for our shareholders.

Nikhil Kamath 2:05:22 So till now, you've told me, "Go to ChatGPT, figure out, or go to the website-"

Rahul Sharma 2:05:27 No, no, just, uh, you know, just as I said-

Nikhil Kamath 2:05:29 Yeah

Rahul Sharma 2:05:29 ... these days, there are a lot of-

Nikhil Kamath 2:05:30 Right

Rahul Sharma 2:05:30 ... avenues where you can go and find out multiple sort of information.

Nikhil Kamath 2:05:34 Right. So I figure out one component which is going into US cell phone manufacturer, which is coming from China.

Rahul Sharma 2:05:40 Hmm.

Nikhil Kamath 2:05:41 And then I go about figuring if that raw material is available in In- India. I identify that there is. What do I do next to set up a factory which makes it?

Rahul Sharma 2:05:52 Okay, let's take an example. Uh, Carl, can I use your phone? Let's say these are this USB socket.

Nikhil Kamath 2:06:02 Yeah.

Rahul Sharma 2:06:03 Right? This USB socket is the most abused-

Nikhil Kamath 2:06:07 Hmm

Rahul Sharma 2:06:08 ... component here, because let's say a million times you're going to-

Nikhil Kamath 2:06:11 Yeah.

Rahul Sharma 2:06:13 Right? So this means to say that this will require a special sort of material.

Nikhil Kamath 2:06:17 Hmm.

Rahul Sharma 2:06:17 Study that material, where that material is available-

Nikhil Kamath 2:06:20 Hmm

Rahul Sharma 2:06:21 ... who is manufacturing it, at what cost, and, uh, absolutely go to the, to the root of that.

Nikhil Kamath 2:06:29 Hmm.

Rahul Sharma 2:06:30 And then see what are the... If, if you can go and visit those, these factories-

Nikhil Kamath 2:06:36 Hmm

Rahul Sharma 2:06:37 ... buying, tapping someone, getting into a network.

Nikhil Kamath 2:06:40 These factories in China?

Amit Khatri 2:06:42 Wherever.

Rahul Sharma 2:06:42 Wherever.

Nikhil Kamath 2:06:43 Yeah.

Rahul Sharma 2:06:43 Wherever, if it, if possible.

Nikhil Kamath 2:06:45 Hmm.

Rahul Sharma 2:06:45 See, and then understand the standards.

Nikhil Kamath 2:06:48 Hmm.

Rahul Sharma 2:06:48 See, why this is not happening? Why I gave you a glue example?

Nikhil Kamath 2:06:50 Hmm.

Rahul Sharma 2:06:50 Because people said, "No, India can't make that."

Nikhil Kamath 2:06:52 Hmm.

Rahul Sharma 2:06:52 Why can't we make that?

Nikhil Kamath 2:06:53 Hmm.

Rahul Sharma 2:06:53 We are, we are fantastic in chemical, our chemical industry, our pharma, they're doing brilliantly well.

Nikhil Kamath 2:06:58 Hmm.

Rahul Sharma 2:06:59 Probably there's maybe there's, you know, not awareness of that, that or the volumes and everything, but I think it's... If you are going to go, let's say, from $100 billion to $500 billion, it's a massive opportunity. Similarly, here.

Nikhil Kamath 2:07:12 Hmm. What else can be done? Like, see, the outcome of this is, we want, even if it's five kids who start

Nikhil Kamath 2:07:22 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.

Amit Khatri 2:07:34 Also, like, uh, we spoke-

Rahul Sharma 2:07:36 And I think we will need 5,000 of those kids-

Nikhil Kamath 2:07:38 Yeah

Rahul Sharma 2:07:38 ... because it's a hu- it's a huge universe, and we don't have it here.

Nikhil Kamath 2:07:43 Yeah.

Rahul Sharma 2:07:43 We have to bring it in.

Nikhil Kamath 2:07:45 Yeah.

Amit Khatri 2:07:46 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.

Nikhil Kamath 2:07:52 What is the biggest need? Say two things that you want me-

Amit Khatri 2:07:55 Let's say for, for us-

Nikhil Kamath 2:07:56 Hmm

Amit Khatri 2:07:56 ... 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?

Rahul Sharma 2:08:08 ... one and a half, close to one dollar?

Carl Pei 2:08:10 Mm.

Rahul Sharma 2:08:11 If you save, make it in India, it's a huge volume. It's maybe half a million, one million screens a month.

Nikhil Kamath 2:08:17 What is the margin in screen business?

Rahul Sharma 2:08:19 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.

Carl Pei 2:08:27 Oh, the sm- you know, the smartphone screens from China? Those companies are losing money to sell the screens.

Rahul Sharma 2:08:34 Yeah.

Carl Pei 2:08:34 'Cause they have policies that subsidize the creation of that, uh, industry. So at least for the smartphone screens, it's very hard for-

Nikhil Kamath 2:08:41 So you're saying our import duty has to be higher than their subsidy, at the least?

Carl Pei 2:08:47 At the least, if... Yeah. Yeah, yeah.

Nikhil Kamath 2:08:50 Right.

Rahul Sharma 2:08:50 So one is import duty, and second, of course, the PLI schemes coming on components- Correct.

Nikhil Kamath 2:08:54 Mm.

Rahul Sharma 2:08:55 -will incentivize to use more Make in India.

Nikhil Kamath 2:08:57 Any advice to the government? Because I'm sure somebody will be watching. How should the PLI scheme be structured for components?

Rahul Sharma 2:09:04 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]

Nikhil Kamath 2:09:09 It's a good scheme.

Rahul Sharma 2:09:11 Yes, it's a good scheme. It's a, it's a good scheme. But the... See, the larger point here is that you have to ensure that locally made products-

Nikhil Kamath 2:09:24 Mm

Rahul Sharma 2:09:24 ... make more sense for anybody who wants, who, you know, who's selling, let's say, in India. I'm not even talking about export. If Carl wants to buy a, let's say, a middle frame-

Nikhil Kamath 2:09:35 Mm

Rahul Sharma 2:09:36 ... he should be able to source it locally, and it should be cheaper for him, not because he's forced because of a regulation. It should also make sense economically for him to do that.

Nikhil Kamath 2:09:47 And that, in today's world, because of scale, can only happen with custom duty or the tariff.

Rahul Sharma 2:09:54 S- yeah, so tariff, no-

Carl Pei 2:09:55 Depending on the components.

Rahul Sharma 2:09:56 Yes.

Carl Pei 2:09:57 I think plastic should be very easy, right? To replicate here.

Rahul Sharma 2:10:01 Yes. Plastic, and, uh, and second, the, as I said, the government incentive schemes. Because, you know, if you see how China was built-

Nikhil Kamath 2:10:09 Mm

Rahul Sharma 2:10:09 ... because of all the government schemes only.

Nikhil Kamath 2:10:11 Mm.

Rahul Sharma 2:10:12 And why their exports went up, because the export schemes are, like, massive.

Nikhil Kamath 2:10:15 You three continue talking. Like, I am a twenty-five-year-old, I'm trying to learn from three stalwarts of our consumer electronic industry. I want to make money, end goal.

Carl Pei 2:10:27 The biggest money maker is, like, um, [lips smack] the industries with fewer competitors, right? Like NVIDIA. If you look at the NVIDIA share price-

Rahul Sharma 2:10:36 [chuckles] You've taken an extreme example

Carl Pei 2:10:37 ... it's insane. But even for, for our industry, like, I th- I'm, I think the chipset makers, their margins are way higher than the EMS factories, right? NVIDIA, I don't know, is it forty or Qualcomm is forty, sixty-

Rahul Sharma 2:10:50 They're forty, forty-five percent, I think they just declared, yeah.

Carl Pei 2:10:52 Forty-five percent gross margin. Um, but Foxconn is, I think, ten percent. So, like, eventually we also have to move upmarket, right, into, like, more and more difficult, uh, lower competition areas of the stack.

Rahul Sharma 2:11:06 Yes, but, um, Carl, again, Nikhil's point is that, how do we inspire the young generation out here to start doing something? You know, how do they spot opportunities?

Nikhil Kamath 2:11:16 Yeah.

Rahul Sharma 2:11:17 So, as I said, if you tear down the phone-

Carl Pei 2:11:19 Mm-hmm

Rahul Sharma 2:11:20 ... what are the easiest five things, ten things you can just pick up and say, "Hey, this I can do?"

Nikhil Kamath 2:11:25 Mm.

Rahul Sharma 2:11:26 This is a little, little, is not that complex.

Carl Pei 2:11:29 Mm-hmm.

Rahul Sharma 2:11:30 By the way, you know, he's right, you know, so making these, uh-

Nikhil Kamath 2:11:36 Mm

Rahul Sharma 2:11:37 ... mechanics, for example-

Nikhil Kamath 2:11:38 Mm

Rahul Sharma 2:11:38 ... the precision mechanics-

Nikhil Kamath 2:11:39 Mm

Rahul Sharma 2:11:40 ... is not that easy. We still, you know, it's a lot of things are getting imported, even on precision mechanics.

Nikhil Kamath 2:11:45 Yeah?

Rahul Sharma 2:11:45 Yeah. But once there are a lot of incentives and all-

Nikhil Kamath 2:11:49 Mm

Rahul Sharma 2:11:49 ... we have ample, uh, people here who can take a shot at that.

Carl Pei 2:11:53 I'm curious to hear, like, how, how does the next, uh, Qualcomm... Like, if a kid is watching this, like, say, 30 years later, they created Qualcomm, the next Qualcomm, like, how does that path happen?

Rahul Sharma 2:12:07 So, mm, you know, you're, Carl, you're just straightaway talking about a moonshot. But instead of a Qualcomm, one Qualcomm, I'm saying can we make, for example, uh, if I have to take an example of, uh, automobile, let's say in terms of components, can we make 300 or 500 Mindas here?

Carl Pei 2:12:29 Mm-hmm.

Rahul Sharma 2:12:30 Minda is a good example, you know? Auto is all making money- Yeah ... all over.

Carl Pei 2:12:37 Makes sense.

Rahul Sharma 2:12:38 Yeah, I think that's a, that's a very large opportunity knocking on our door.

Nikhil Kamath 2:12:42 How much money would I need to start a factory around, say, the USB port?

Rahul Sharma 2:12:47 I think it will be very less, right? For a USB port. USB, ""- You would know it the best. Yeah, it's, uh, um... You know, Molly and all, uh, they're like specialized Europeans, uh, who are working on this. Um, but again, it was just an example.

Nikhil Kamath 2:13:07 Mm.

Rahul Sharma 2:13:07 But once you go inside-

Nikhil Kamath 2:13:09 Mm

Rahul Sharma 2:13:09 ... Nikhil, as I said, you can find out-

Nikhil Kamath 2:13:12 Mm.

Rahul Sharma 2:13:12 For example, inside there is a, you have battery.

Nikhil Kamath 2:13:16 Mm.

Rahul Sharma 2:13:16 On battery, to dissipate the heat, you need some mechanism to dissipate the heat.

Nikhil Kamath 2:13:21 Mm.

Rahul Sharma 2:13:22 You need a graphene, small film of graphene, which you can put, which can dissipate the heat. You can make it here.

Nikhil Kamath 2:13:27 Mm.

Rahul Sharma 2:13:29 It will go in every phone.

Nikhil Kamath 2:13:30 Mm.

Rahul Sharma 2:13:31 So I'm not saying straight away you go and target, "Okay, I'm gonna make the next Sony camera," or something like that.

Nikhil Kamath 2:13:36 And the PLI scheme will incentivize all of this?

Rahul Sharma 2:13:40 So as of now, they have structured it for, let's say, components which are high in value, let's say, which cover seventy to seventy-five percent of the mobile phone.

Nikhil Kamath 2:13:49 Mm.

Rahul Sharma 2:13:50 But these are all B2B businesses then.

Nikhil Kamath 2:13:52 Mm.

Rahul Sharma 2:13:53 Everybody has a different inclination towards, uh, what they want to build.

Nikhil Kamath 2:13:57 No, anything is fine. I just want to build something in this space where I can actually make money. Is there financing available? Let's say, I figure out a certain product which is under PLI that I start building.... but I don't have too much initial capital. How does one go around getting that initial funding? If I come up with a business plan and come to somebody like Rahul, will you give it?

Rahul Sharma 2:14:23 Yes. If I, if I see that your product works-

Nikhil Kamath 2:14:26 Mm.

Rahul Sharma 2:14:28 -working as per the standards, and then-

Nikhil Kamath 2:14:31 Would a bank give it?

Rahul Sharma 2:14:32 I think yes, but of course, bank works on collaterals.

Nikhil Kamath 2:14:34 I don't have collateral.

Rahul Sharma 2:14:36 There are a few banks who might, you know...

Nikhil Kamath 2:14:38 Is there some startup scheme, some government subsidy where I can get that initial cap?

Rahul Sharma 2:14:42 Yes, you can. There are multiple schemes. Again, yeah, very good point.

Nikhil Kamath 2:14:45 Mm.

Rahul Sharma 2:14:46 There are so many schemes which people are not even aware of.

Nikhil Kamath 2:14:48 Mm.

Rahul Sharma 2:14:49 For example, for MSME sector-

Nikhil Kamath 2:14:51 Mm.

Rahul Sharma 2:14:51 -for as as, you know, from Invest India, from Startup India, there are multiple schemes going on which people even are not even aware.

Nikhil Kamath 2:14:58 I'm not aware. How do I find out?

Rahul Sharma 2:15:00 Well, "... " Itna effort toh karna padega.

Nikhil Kamath 2:15:02 Mm.

Rahul Sharma 2:15:02 Then you need to go after that and find out how many schemes are available, and then one by one, just-

Nikhil Kamath 2:15:07 Which one applies to me?

Rahul Sharma 2:15:08 Yes. For example, there is a PLI everybody knows, but there is a DLI, which is Design-Led Incentive-

Nikhil Kamath 2:15:14 Mm

Rahul Sharma 2:15:14 ... for the chipsets and all.

Nikhil Kamath 2:15:15 Mm.

Rahul Sharma 2:15:16 You should know that.

Nikhil Kamath 2:15:17 Mm.

Rahul Sharma 2:15:18 There is a grant for that.

Nikhil Kamath 2:15:20 Mm.

Rahul Sharma 2:15:20 You need to show your designs. Government, you know, once... They will come inspect and see what you're doing, and then you can do that.

Nikhil Kamath 2:15:26 Mm.

Rahul Sharma 2:15:27 For a right idea, you will knock on hundred doors, one door will open.

Nikhil Kamath 2:15:34 Mm.

Rahul Sharma 2:15:34 But you need, you need to knock.

Nikhil Kamath 2:15:38 Mm.

Rahul Sharma 2:15:38 You just can't say, okay, as you just said, either a bank will come up or a VC will come up-

Nikhil Kamath 2:15:44 Mm

Rahul Sharma 2:15:44 ... or an government scheme will come up. Something will come up for a right idea.

Nikhil Kamath 2:15:48 I was reading this thing. Somebody had sent me an email saying, "Semiconductor, something drastic is happening in India." Is that a possibility?

Rahul Sharma 2:15:57 Like, drastic means?

Nikhil Kamath 2:15:59 Like... So the backstory goes that at one point, India was really focused on semiconductors. There was one particular factory which burned down, but in the last twenty years, we've been left behind, or thirty years we've been left behind, and they're restarting the effort to manufacture more semiconductors in India. Is that possible with TSMC and all of that? The whole world is relying on them, right?

Rahul Sharma 2:16:25 You mean, like, start a new TSMC or get TSMC to come here?

Nikhil Kamath 2:16:28 Like, both semiconductor design and manufacturing. Can I-

Rahul Sharma 2:16:31 So you can't create a TSMC-

Nikhil Kamath 2:16:32 Can you compete? I think it comes down to, like, the depth of the, of the thing, right? Like, how many millimeter.

Rahul Sharma 2:16:38 So we are working in one of the companies on semiconductors, and what you're referring is there was one fab in India-

Nikhil Kamath 2:16:45 Mm

Rahul Sharma 2:16:45 ... only one fab, which was in Mohali.

Nikhil Kamath 2:16:46 Mm.

Rahul Sharma 2:16:47 Government-owned, long back.

Nikhil Kamath 2:16:48 Yes, yes.

Rahul Sharma 2:16:49 Doing probably, you know, hundred nanometers or something like that.

Nikhil Kamath 2:16:55 Mm.

Rahul Sharma 2:16:55 Today, TSMC is doing two nanometers.

Nikhil Kamath 2:16:58 Mm. Two, three, two, three, correct. Mm.

Rahul Sharma 2:17:00 So of course, I mean, you can't catch up with two nanometer. Even, see, China started their semiconductor program twenty years back.

Nikhil Kamath 2:17:05 Mm.

Rahul Sharma 2:17:06 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.

Nikhil Kamath 2:17:25 Mm.

Rahul Sharma 2:17:25 But if you see today, it is.

Nikhil Kamath 2:17:27 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?

Rahul Sharma 2:17:46 It's a tough question because, you know, it is divided into multiple parts.

Nikhil Kamath 2:17:49 Mm.

Rahul Sharma 2:17:50 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.

Nikhil Kamath 2:18:01 Mm.

Rahul Sharma 2:18:02 Right? So even that, you know, if we can start at thirty-five, a- because those are larger components-

Nikhil Kamath 2:18:10 Mm

Rahul Sharma 2:18:10 ... which can go into, you know, other things, you know, refrigerators and TVs-

Nikhil Kamath 2:18:16 Mm

Rahul Sharma 2:18:17 ... and vacuums and, you know, on cars and all. And then slowly, slowly, you start coming in for the ITs and the mobile phones.

Nikhil Kamath 2:18:24 Mm.

Rahul Sharma 2:18:25 But at least we start attacking the, you know, the thirty-five, forty nanometers, twenty-five nanometers, start attacking that.

Nikhil Kamath 2:18:32 Mm.

Rahul Sharma 2:18:32 [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-

Nikhil Kamath 2:18:40 Mm

Rahul Sharma 2:18:40 ... 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.

Nikhil Kamath 2:18:47 Mm.

Rahul Sharma 2:18:48 Country, you know, has to come into it. For example, to do a, let's say, anything less than ten nanometers, you need to have lithography.

Nikhil Kamath 2:18:57 What is that?

Rahul Sharma 2:18:58 It's a machine.

Nikhil Kamath 2:18:59 Mm.

Rahul Sharma 2:18:59 It's a technology.

Nikhil Kamath 2:19:00 Mm.

Rahul Sharma 2:19:01 That technology is right now with Holland, Netherlands. There's a company, uh, this company name is, uh-

Nikhil Kamath 2:19:12 ASML

Rahul Sharma 2:19:13 ... ASML.

Nikhil Kamath 2:19:13 No competitors. [chuckles]

Rahul Sharma 2:19:14 Yeah, so ASML has those machines, right? You need to have access to that. In those machines, the software actually is coming from the United States. So it's a, it's all a... Because it's a, it's a game where you need to work on this technology and need to stabilize the technology, so the government has to come and play into that. So, [clears throat] it's, uh, it's way more deeper than what we feel, because, you know, uh, but s- you know, semiconductor is a vast range. It's, uh, it's not only that-

Nikhil Kamath 2:19:40 Mm

Rahul Sharma 2:19:40 ... only doing a TSMC, because when we talk about semiconductors, we all, we always talk about TSMC.

Nikhil Kamath 2:19:45 Mm. Mm.

Rahul Sharma 2:19:46 Memory. Why can't India has its own memory? Can we design? Or let's, for example, in, in your IT, there is Gen 4, there is Gen 5, now there's Gen 6. Why can't India come up with, let's, I'm talking about, let's say, Gen 8 or Gen 9? End of the day, you have to have that. So these are all opportunities-

Nikhil Kamath 2:20:07 I'll ask you a question on top of your question only. Why is it not happening?

Rahul Sharma 2:20:11 Because in India, we were good in services-

Nikhil Kamath 2:20:14 Mm.

Rahul Sharma 2:20:14 ... so we were, our services sector was doing good, so people said, "Okay, let's build on the services business."

Nikhil Kamath 2:20:18 Mm.

Rahul Sharma 2:20:19 So if you see all these Gen 4, 5-

Speaker 2:20:22 ... half of their manpower will be sitting in Bangalore and Hyderabad-

Nikhil Kamath 2:20:25 Mm.

Speaker 2:20:26 -and designing for the other bigger brands who are somewhere in US or other countries.

Nikhil Kamath 2:20:32 Mm.

Speaker 2:20:34 But not for us, because, A, we were not having those government programs earlier.

Nikhil Kamath 2:20:38 Mm.

Speaker 2:20:38 They were not, right, not focused on creating something like that.

Nikhil Kamath 2:20:43 Mm.

Speaker 2:20:44 So where the buck was moving was, okay, service is an easy business, let's go there.

Nikhil Kamath 2:20:49 Mm.

Speaker 2:20:50 As I said, half of the people working on those technologies will be from India. Okay? He was talking about Qualcomm or MTK. Their biggest R&D centers are in India.

Nikhil Kamath 2:20:59 Mm?

Speaker 2:21:00 Yes. So the foc- so foc- but now we have, you know, with the, with the current government, all the new schemes coming in, people are becoming more aware of that.

Nikhil Kamath 2:21:12 Mm.

Speaker 2:21:13 See, today, we did, we are discussing about semiconductors.

Nikhil Kamath 2:21:16 Mm.

Speaker 2:21:16 Otherwise, if it was a consumer brand or electronics and that, why we'll be discussing about semiconductors? Because now, all of us, because of the policies and everything on whatever happened, we are more aware on that.

Nikhil Kamath 2:21:27 Mm. You're doing a bunch of very new things, right? Like, with television, operating software. There's one company that we're both part of around television as well.

Speaker 2:21:39 Yeah.

Nikhil Kamath 2:21:40 What's happening in that world? Would you like to tell us?

Speaker 2:21:42 No, that's more on the-

Nikhil Kamath 2:21:44 Mm

Speaker 2:21:44 ... on the aggregation, because the way we consume content is completely changing.

Nikhil Kamath 2:21:47 Mm. Can you tell us your thesis around that?

Speaker 2:21:51 Thesis is that, you know, you buy a product, and then you start getting multiple apps, and then you start paying different apps. Then your user experience is then that whatever recommendation, one is showing something else, the other is showing us some different recommendation, third is showing something else. Why can't I have an experience wherein I switch on my TV, and then I don't have to go in any app? There is one user interface, and all the apps are stitched into that. You just type in your, let's say,

Speaker 2:22:27 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.

Nikhil Kamath 2:22:41 Mm.

Speaker 2:22:43 That's one area, because, again, it's an evolving space. And then you bundle it along with the hardware piece-

Nikhil Kamath 2:22:50 Mm

Speaker 2:22:50 ... wherein you move on a SaaS model.

Nikhil Kamath 2:22:53 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.

Speaker 2:23:03 Yes.

Nikhil Kamath 2:23:04 How, how do you get their stuff? Like, it's not in their incentive to unbundle their content.

Speaker 2:23:10 Like you're saying, how do you get access to that content?

Nikhil Kamath 2:23:12 Yeah, for instance, Netflix. If I'm Netflix, and you say you just want to take the content-

Speaker 2:23:16 You know, apart from Netflix, you take some other example, because that's a different animal altogether.

Nikhil Kamath 2:23:20 Hotstar.

Speaker 2:23:21 Let's say, yeah, Hotstar, yeah.

Nikhil Kamath 2:23:22 So I have my own app.

Speaker 2:23:24 Mm.

Nikhil Kamath 2:23:24 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?

Speaker 2:23:40 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-

Nikhil Kamath 2:24:00 Mm

Speaker 2:24:00 ... for the user, I think it's, it's acceptable.

Nikhil Kamath 2:24:03 Mm. So for them, it's like incremental?

Speaker 2:24:05 Yes.

Nikhil Kamath 2:24:06 If I don't work with you, I won't make this money. Might as well make the money.

Speaker 2:24:09 Because they also need distribution.

Nikhil Kamath 2:24:11 Yeah. So then, then you have a big, a few big ones that are harder to negotiate with.

Speaker 2:24:16 They will, they will come in scale.

Nikhil Kamath 2:24:18 Yeah.

Speaker 2:24:18 So once you achieve scale, they will say, "All right."

Nikhil Kamath 2:24:20 Yeah.

Speaker 2:24:21 "We, we, you know, well, so..."

Nikhil Kamath 2:24:21 I get it.

Speaker 2:24:22 Yes.

Nikhil Kamath 2:24:23 It's a bit like cell phone and app store, right?

Speaker 2:24:26 Yeah.

Nikhil Kamath 2:24:26 Yeah. So when there's a new OS- ... mm,

Speaker 2:24:29 -on the cell phone, the big app makers are not gonna adopt, right? They're gonna wait for the distribution to come first.

Nikhil Kamath 2:24:37 So I think it's about that adoption.

Speaker 2:24:39 Yeah.

Nikhil Kamath 2:24:40 But when you bundle, I think it gets cheaper.

Speaker 2:24:43 Yeah.

Nikhil Kamath 2:24:45 Why don't you guys speak like I'm not in the room and there are no cameras?

Speaker 2:24:49 Yeah. Isn't... We're, we're trying to. [chuckles]

Nikhil Kamath 2:24:51 Carl, what opportunity exists in the consumer market-

Speaker 2:24:55 What-

Nikhil Kamath 2:24:55 ... besides phones?

Speaker 2:24:57 What do I want to have exist?

Nikhil Kamath 2:24:58 No, no, I mean, what are the opportunities which-

Speaker 2:25:00 Oh, what opportunities exist?

Nikhil Kamath 2:25:02 For- not for the large players.

Speaker 2:25:04 I'm, I'm only thinking about, like, very big categories all the time. Um, so I'm thinking about, like, EVs and, uh, robotics stuff. Uh, s- but I agree that, like, if you're young, you have to start with something-

Nikhil Kamath 2:25:17 Yeah

Speaker 2:25:17 ... more simple.

Nikhil Kamath 2:25:19 What is China like? What else do you think we can learn as a country from them?

Speaker 2:25:25 Uh, I don't spend a lot of time thinking about policy, but I do think the PLI is set up... Uh, you probably know more about PLI than me, but-

Nikhil Kamath 2:25:32 Mm

Speaker 2:25:32 ... um, like, we are very keen to be a part of the, the next generation PLI scheme. Um,

Speaker 2:25:41 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-

Nikhil Kamath 2:26:26 Mm

Speaker 2:26:26 ... in terms of so-

Amit Khatri 2:26:28 ... 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-

Speaker 2:26:49 Mm.

Amit Khatri 2:26:50 -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.

Speaker 2:27:00 Mm.

Amit Khatri 2:27:01 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.

Speaker 2:27:15 Mm.

Amit Khatri 2:27:15 We need to build, you know, build bigger ports-

Speaker 2:27:18 Mm

Amit Khatri 2:27:19 ... 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.

Speaker 2:27:30 Yeah, I think consumer electronics is, um, very expensive and difficult thing for somebody without experience-

Amit Khatri 2:27:38 Yeah

Speaker 2:27:38 ... to all of a sudden go in.

Amit Khatri 2:27:39 Experience is key, I believe. Without that, you can't do. And you, in fact, can't do also, I personally think.

Speaker 2:27:47 Yeah.

Amit Khatri 2:27:47 Doing is expensive only, but you'll, you'll hundred percent make mistakes.

Speaker 2:27:52 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.

Amit Khatri 2:28:00 Mm.

Speaker 2:28:00 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.

Amit Khatri 2:28:22 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.

Speaker 2:28:33 To gone?

Amit Khatri 2:28:34 To gone outside India. So-

Speaker 2:28:36 Indian brands?

Amit Khatri 2:28:37 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.

Speaker 2:28:53 Well, tu pehle bata.

Amit Khatri 2:28:54 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.

Speaker 2:29:59 It's starting now, right?

Amit Khatri 2:30:00 Yeah.

Speaker 2:30:01 With you guys.

Amit Khatri 2:30:02 No, so that's what we are trying to do. We believe that it is a right platform for us. Uh, we have gained decent experience, and international markets, we could do justice.

Speaker 2:30:14 Mm-hmm.

Amit Khatri 2:30:14 But I'm generally talking, we need more brands. Uh, one brand can't do. I mean, I've seen we all buying international brands.

Speaker 2:30:21 Are you talking about, uh, you want me to answer in consumer electronics?

Amit Khatri 2:30:23 I'm talking about consumer electronics specifically, yeah.

Speaker 2:30:26 In consumer electronics, you can go into those markets where your products are relevant.

Amit Khatri 2:30:33 Uh, bang on.

Speaker 2:30:34 Take it. So, for example, in Indian demographics, whatever products you're making, you're going to take the same product because of, because you have scale, and you go there?

Amit Khatri 2:30:42 So that's what I'm saying. So when... I mean, I want to cater to a market which is, let's say, mid, because I, I don't want the cheapest product.

Speaker 2:30:52 It's fine. So-

Amit Khatri 2:30:53 Indian demographic.

Speaker 2:30:54 So Indian de- so those products you have taken into those similar categories and similar, uh, you know, geographies?

Amit Khatri 2:31:01 Yeah.

Speaker 2:31:01 That you can do.

Amit Khatri 2:31:02 Yeah.

Speaker 2:31:03 Southeast Asia, all other, you know... So for example, all the SAARC countries, then this side, Russia, Eastern Europe, these are fantastic markets.

Amit Khatri 2:31:12 Yeah.

Speaker 2:31:13 Right. Then second, if you're saying that you want to hit the upper deck.

Amit Khatri 2:31:19 I'm, I'm just saying middle. I'm upper, though, so upper I'm very clear, let Sony, Samsung play the game they are, what they are playing, or Apple. We don't want to touch them. The consumers are very loyal. They have an ecosystem. They have advantages of whatever-

Speaker 2:31:32 Yeah

Amit Khatri 2:31:32 ... they could, so.

Speaker 2:31:33 You already have a scale in India, and then a- when you're going outside, you know you go with that same scale-

Amit Khatri 2:31:41 Yeah

Speaker 2:31:41 ... and cater to that. Create one or two more brands and use, leverage the scale what you have, and, you know, you can attack the market specifically.

Amit Khatri 2:31:53 No, that's what I'm saying. We can do it.

Speaker 2:31:54 Hundred percent you can do it.

Amit Khatri 2:31:55 India need those brands.

Speaker 2:31:56 Yes.

Amit Khatri 2:31:57 We are just know more about basic necessity brands, where we're just solving for features. And you will be surprised, I'll tell you, Rahul, where I'm coming from. When we, we just launched in, uh, Dubai, in Virgin stores. Traditionally, Indian brands would have gone and launched a $20 product. We launched ourself at $75 to $100 pricing, and we're getting a great response. I mean, look at the kind of response people are giving for a decent priced point products.

Speaker 2:32:23 Again, innovation is one, is-

Amit Khatri 2:32:24 Hundred percent. Innovation is needed. You can't enter a commodity space.

Speaker 2:32:27 Innovation, and then you can have, uh, create-... different brands for, uh, you know, different needs.

Amit Khatri 2:32:36 One brand can't serve all, that's true. You look at-

Speaker 2:32:39 Here you have OPPO, then you have OnePlus, then you have Realme, under one umbrella only.

Nikhil Kamath 2:32:44 We have two brands.

Speaker 2:32:45 Yeah. [chuckles] He has to come up with CMF because-

Nikhil Kamath 2:32:48 We need the scale.

Speaker 2:32:49 Yeah.

Amit Khatri 2:32:50 The scale 100% is needed. I think you can build mid-market with a scale, otherwise nobody gonna support you.

Nikhil Kamath 2:32:58 Yeah. But I think it's, um, it's, it's... The Indian economy has gotten to a point in time where there's, um, entrepreneurs with the skill set to go global, and there's already the language, uh, advantage, the language and culture advantage.

Speaker 2:33:10 Eng-

Nikhil Kamath 2:33:10 It's easier to do marketing-

Amit Khatri 2:33:11 Yeah

Nikhil Kamath 2:33:12 ... right? Easier, easier to do US or Europe. Um, but on the product definition side, it's easier to go to more similar markets first. There will be more risk going into-

Amit Khatri 2:33:24 You need product market fit, which I'm aligned.

Nikhil Kamath 2:33:25 Yeah.

Amit Khatri 2:33:25 You go to... Like, we also are going to similar markets, which are easy acceptance.

Nikhil Kamath 2:33:29 Mm-hmm.

Amit Khatri 2:33:29 And then try to go in territory. I respect all territories, so I mean, let's say US, these are all are tough markets. It's not easy to go and break there. So I would like to go small there, do little trials, fail-

Nikhil Kamath 2:33:40 Mm-hmm

Amit Khatri 2:33:40 ... and then take on.

Speaker 2:33:42 Yeah, so there are, as I said, going to SAARC countries, going to, you know, Russia, Eastern Europe. These are all, uh, you know, great markets for you to do your trials and all, and then also tweak.

Amit Khatri 2:33:55 Maybe we should start like a hub. Like, start a place where we fund young entrepreneurs to build some of the stuff we spoke about.

Speaker 2:34:04 100%.

Amit Khatri 2:34:06 Right?

Speaker 2:34:06 Sure.

Amit Khatri 2:34:06 Like, get some land, give them the resources. You guys all have the know-how. Like, start one place where people can... Like an incubator of sorts, with real estate.

Speaker 2:34:20 And, uh, and it's easier to do.

Amit Khatri 2:34:23 Mm.

Speaker 2:34:23 On, uh... And it could be anything. You know, you can- if somebody comes up with an idea with a diaper which will have some connectivity, which will tell us that it is wet or not or whatever-

Amit Khatri 2:34:35 Mm

Speaker 2:34:35 ... it's same tech what you're using, let's say, in the ring.

Amit Khatri 2:34:39 I just found out a tech where, uh, my daughter, I want- my wife wanted to mon- monitor my daughter about fever, and you can't measure every time for a kid. So there was a socks she could wear for a, when she was six months or a year. It could track the sleep, the temperature, and everything. So, I mean, these, these are micro-niche market-

Speaker 2:34:59 Yeah

Amit Khatri 2:34:59 ... but, yeah, innovations are there.

Nikhil Kamath 2:35:00 What's the deal with these rings that you're wearing? Why are they growing so much? Why is everybody buying them?

Amit Khatri 2:35:05 So I, I think market moves in different form factors.

Nikhil Kamath 2:35:11 Mm.

Amit Khatri 2:35:12 And, uh, market need newness. This form factor, like watches, are maybe mass adoption phase, whatever phase you want to call. Uh, rings are a new category, early adopters, and people are getting more health conscious also.

Nikhil Kamath 2:35:30 Mm.

Amit Khatri 2:35:31 So they are pairing it with their watches, by the way. They are not a replacement for a watch.

Nikhil Kamath 2:35:35 Is that an opportunity, health-related consumer electronics? Are you guys seeing any trends there?

Amit Khatri 2:35:42 So, uh-

Nikhil Kamath 2:35:43 I wear a Whoop on my feet.

Amit Khatri 2:35:46 So what I have realized, so I'm into... I mean, uh, I'm a little bit into this space, so I understand it. So consumer is saying it's good to have. Meaning, "I want

Amit Khatri 2:35:58 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.

Nikhil Kamath 2:36:08 Mm.

Amit Khatri 2:36:09 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.

Nikhil Kamath 2:36:19 Mm.

Amit Khatri 2:36:19 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-

Nikhil Kamath 2:36:30 You know that patch which measures-

Amit Khatri 2:36:32 CGM

Nikhil Kamath 2:36:33 ... in- insulin spikes?

Amit Khatri 2:36:34 Yeah.

Nikhil Kamath 2:36:35 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?

Amit Khatri 2:36:43 So if you look at use cases, so I think these devices... Okay, diabetic is a very big, uh, used case, uh-

Nikhil Kamath 2:36:51 Mm

Amit Khatri 2:36:51 ... this problem, and this doesn't work, by the way. Nobody, nobody uses it. For us, we have used for wellness-

Nikhil Kamath 2:36:57 Mm

Amit Khatri 2:36:57 ... 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.

Nikhil Kamath 2:37:03 Mm.

Amit Khatri 2:37:04 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.

Nikhil Kamath 2:37:21 Is there no opportunity unique to India?

Amit Khatri 2:37:24 No, there's an-

Nikhil Kamath 2:37:24 What do we want in health that other people don't want, which Apple won't get?

Amit Khatri 2:37:27 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.

Nikhil Kamath 2:37:48 Mm.

Speaker 2:37:48 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.

Nikhil Kamath 2:38:00 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-

Speaker 2:38:12 Mm-hmm

Nikhil Kamath 2:38:13 ... which costs $150, where you can't, like, really browse the net-

Speaker 2:38:18 Mm

Nikhil Kamath 2:38:18 ... and go to YouTube and Netflix, but replace your school bag with that device. You mean learning like that?

Speaker 2:38:25 Mm.

Nikhil Kamath 2:38:25 Do you think something like that could work?

Speaker 2:38:26 That could work. It could also be like, uh, some form of smartwatch for kids, for learning, maybe with an AI companion. It could also just be a teddy bear.

Nikhil Kamath 2:38:35 ... That's there, no? The toy is there.

Rahul Sharma 2:38:37 Miko, Miko is-

Nikhil Kamath 2:38:39 Mm.

Rahul Sharma 2:38:39 Miko is doing good.

Nikhil Kamath 2:38:40 Mm.

Carl Pei 2:38:41 I just know that, uh, it's a space where people wanna spend money and are not price sensitive.

Nikhil Kamath 2:38:46 So you- wherever you are spending, you will spend for your parents, you will spend for your kids.

Carl Pei 2:38:50 And your health. And health.

Nikhil Kamath 2:38:53 What do you guys think of Elon Musk and Neuralink?

Carl Pei 2:38:56 I, I like the thesis. It's trying to make the communication b-

Nikhil Kamath 2:39:00 Yeah

Carl Pei 2:39:00 ... more efficient. Um, ef- efficiency is always, uh, beneficial-

Nikhil Kamath 2:39:05 Mm

Carl Pei 2:39:05 ... to humanity, but maybe there's other ways to get to higher efficiency. I don- I don't know how long it will take for that to really work for mass markets.

Nikhil Kamath 2:39:14 Do you think people will be willing to do that? Like, put something in your body, not on your body.

Carl Pei 2:39:20 If the benefits are there, I think so. But currently, the... Yeah, I don't think the benefits are there.

Rahul Sharma 2:39:26 Just dovetailing on, on, into his question, wherein these days people are talking more about organic.

Nikhil Kamath 2:39:32 Mm.

Rahul Sharma 2:39:32 They even don't want to take unnecessary medicines, and...

Carl Pei 2:39:37 I mean, for somebody who, uh, who's disabled, then they get a lot of benefit-

Rahul Sharma 2:39:41 Yeah

Carl Pei 2:39:41 ... from, from using that product today.

Nikhil Kamath 2:39:43 Yeah.

Carl Pei 2:39:43 But at what point does it become beneficial for a normal person to use that, and why? I think there's still some time to go.

Nikhil Kamath 2:39:51 Won't you suddenly become so much smarter if you have something in your head which is telling you everything?

Carl Pei 2:39:57 You can almost have that already now if you have earbuds-

Rahul Sharma 2:40:00 Hey, hey [chuckles]

Carl Pei 2:40:00 ... and with ChatGPT.

Nikhil Kamath 2:40:01 Mm-hmm.

Carl Pei 2:40:01 You can speak to ChatGPT voice.

Rahul Sharma 2:40:03 And with the AI glass also coming in-

Carl Pei 2:40:05 Yeah

Rahul Sharma 2:40:05 ... you're sitting in front of this, this is the setup, this is happening.

Carl Pei 2:40:07 And that's way easier to adopt than operating something into your body.

Nikhil Kamath 2:40:12 What happens to the world? Like, if intelligence is on call, traditional intelligence is on call, or information is on call, we still have to differentiate. How do we do that?

Carl Pei 2:40:26 I think most people are gonna... I think 80% of the population will just chill and receive income from the government, and a small group of people will leverage the new technologies to push society and humanity forward.

Nikhil Kamath 2:40:39 Like universal basic income.

Carl Pei 2:40:40 Yeah, I think that will happen, for sure.

Nikhil Kamath 2:40:42 Yeah.

Rahul Sharma 2:40:43 Well, I think you can't replace, y- you know, emotional quotient out of that. You know, that's what makes all of us unique. All of us... You give us the same piece of information to all four of us, all four of us will behave differently-

Nikhil Kamath 2:40:56 Mm

Rahul Sharma 2:40:57 ... and will have different actions. I think that is something which, uh, you can't take away.

Nikhil Kamath 2:41:04 Mm-hmm. Do you think?

Rahul Sharma 2:41:08 Little bit agree on this. Uh, basic, I think 80% of the jobs will be done. For 20%, you would still need-

Nikhil Kamath 2:41:15 Mm

Rahul Sharma 2:41:16 ... human development.

Carl Pei 2:41:17 Yes, the productivity will increase so much.

Rahul Sharma 2:41:19 But, but I think he's also right, that we all will become more [chuckles] lazy. Like, kids today don't need to use their brain. They will be doing everything on-

Carl Pei 2:41:27 You need to be very self-motivated, but those people can really leverage the technology-

Rahul Sharma 2:41:30 Yeah

Carl Pei 2:41:30 ... to create so much more productivity.

Nikhil Kamath 2:41:33 I wonder if a kid will think, "Tomorrow, if I can just regurgitate a book from my device at any point, then why read the book?"

Carl Pei 2:41:40 That's how I was thinking-

Rahul Sharma 2:41:41 Yeah

Carl Pei 2:41:41 ... when I was in school, like, "I can just Google the information."

Rahul Sharma 2:41:43 Yeah.

Carl Pei 2:41:44 "Why should I memorize this?"

Nikhil Kamath 2:41:45 Okay, last part. I want each of you guys to give one advice to me, the 25-year-old, having watched this today. Tomorrow morning, I want to wake up and figure out what to build, one piece of advice. Would you like to go first?

Rahul Sharma 2:42:05 Uh, I think, uh, if somebody need to plan something in this space or whatever space, I think definitely a thorough research is needed. I mean, why you're going, and, uh, I think you need to have that fuel or patience also to build it, that passion we are, we are talking about. And, and do pick a, a narrow niche instead of going too broad. I mean, pick up a smaller subset of what- whatever problem you want to solve, go double down and then move on. Uh, definitely there are gonna be failures, learnings, but I would term them as learnings, and you keep pivoting with that.

Rahul Sharma 2:42:44 So that would be one thing.

Carl Pei 2:42:45 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-

Nikhil Kamath 2:43:04 Very inspiring advice to wannabe entrepreneurs, Carl, I must say. [chuckles]

Carl Pei 2:43:10 It's better to, better to say it now, right? [laughing] Rather than finding out down the line.

Rahul Sharma 2:43:14 Yeah, ...,

Carl Pei 2:43:16 Just be really sure.

Rahul Sharma 2:43:16 Yeah.

Carl Pei 2:43:16 I think it's, like, it