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Why the largest companies in Silicon Valley are investing billions in India

Silicon Valley are investing billions in India: Since early 2020, the biggest names in US technology have invested around $ 17 billion in India.

Amazon (AMZN) pledged $ 1 billion in January, Facebook (FB) invested nearly $ 6 billion at the end of April, and Google (togetL) surpassed them all last week with a $ 10 billion pledge. They are part of a wave of investment in the Indian technology industry this year that is now well over $ 20 billion, with most of it coming from the United States.

The scale and sources of these investments would have been highly unlikely, if not unthinkable, a few months ago when all of these technology companies were on a collision course with Indian regulators and tech CEOs got cold shouldered when visiting New Delhi. A lot has changed since then.

Silicon Valley investing billions in India
Silicon Valley investing billions in India

The corona virus has hit the global economy and hit India particularly hard. India’s diplomatic spit with China has affected the technology, reconciling it with the Trump administration’s mistrust of Chinese companies. And while India has always been a big draw for US technology companies, the diminishing scope for technical co-operation with China and new threats to its location in places like Hong Kong are giving the Indian market a new meaning.

The flood of investments also shows something that has been true for years: India’s digital economy with more than 700 million internet users and around half a billion who are not yet online is simply too big a price for big tech to ignore for a long time.

“People are confident that India will be a good market in the long term, that its regulations will be fair and transparent in the long term,” said Jay Gullish, technology policy director at the US India Business Council advocacy group. “I think these are just … deepening roots that already exist.”

The China factor

Silicon Valley has been largely excluded from China for years, thanks in part to the country’s massive censorship mechanism known as the Great Firewall. And a controversial new national security law in Hong Kong, in which the services of Google and Facebook are still accessible due to the relatively unrestricted Internet, could push them further away.

The law gives the Hong Kong authorities extensive powers to regulate technology platforms, including an order to dismantle entities that threaten China’s national security or restrict access to their services. Facebook, Google and Twitter have announced that they will stop exchanging data with the Hong Kong government while TikTok has completely left the city.

“It is becoming increasingly difficult to do business with China,” said Mark Lemley, director of the Stanford University Law, Science and Technology program. “There is also a growing feeling that doing business with China involves difficult moral compromises.”

The US distrust of Chinese technology continues to grow. President Donald Trump claimed last week that he had thwarted expansion plans by Chinese technology company Huawei, and his government has announced that it will “test” the ban on the hugely popular short-form video app TikTok, owned by Chinese company ByteDance.
This is a step that would only further align the United States with India.

The Indian government banned TikTok and dozens of Chinese apps last month after a border conflict between the two countries, which killed 20 Indian soldiers, boycotted Chinese products. And although India’s tech relationship with China is still deeply rooted – Chinese smartphones dominate the Indian market and most of the largest Indian startups have significant Chinese investments – the recent tensions could strengthen India’s longstanding tech relationship with the U.S.

“India and its Southeast Asian neighbors have tried to balance the two powers by building closer economic ties with China while maintaining the United States’ security umbrella,” said Ravi Shankar Chaturvedi, research director at Tufts University’s Institute for Business in the USA Global context. “With the latest measures, China has effectively brought the United States to India for one generation.”

Chaturvedi and other experts point out that India and the United States have had a longstanding technical relationship. Thousands of Indian engineers work across Silicon Valley and Indians currently leading Google, Microsoft and several other US companies.

“There are natural synergies between India and the United States in the digital realm,” said Gullish, adding that the increase in Internet use by Indian households, who are making more contacts and working from home during the coronavirus pandemic, is making India more attractive could further increase as a market. “It is easy for American companies to look for opportunities in India,” he said.

Silicon Valley – The richest get richer

At the same time that US technology companies were looking at the Indian market, Asia’s richest man seemed to position himself as a willing goalkeeper.

Most of the technology investment in India this year – including all of Facebook and nearly half of Google’s – went to the coffers of companies controlled by Indian billionaire Mukesh Ambani.

Jio Platforms, the digital subsidiary of Ambanis Conglomerate Reliance, has raised more than $ 20 billion from companies, venture capitalists and sovereign wealth funds since late April to use it as a fast channel for India’s massive digital economy.

Jio was launched in 2016 as a cellular network and has quickly accumulated almost 400 million subscribers. With the recent forays into e-commerce, digital payment, streaming services, and even a zoom-like video conferencing platform called JioMeet, Ambani appears to be transforming the company into a comprehensive Indian ecosystem.
And Silicon Valley clearly wants to go inside.

“US technology was unable to penetrate the Great Firewall of China, but it was easier for them to enter the Great Paywall of India created by Jio. All it had to do was Reliance paid the toll for entry, “said Chaturvedi.

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Reference: CNN Business

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