IF 200 million people become rich enough to afford a new iPad in India each year, then we are looking at a bigger economy. That or cheaper knock offs of iPad or both.
No, we are going to see vast income inequality because half our population is still farming and don't give a damn about education. And we are not in a position to offer manufacturing like China does because we have to compete with a lot of other countries that compete with us, especially those with simpler regulations.
By 2030-35, we are going to get a very large population that can afford expensive gadgets, say about 200 million, while the remaining 1.2 billion or so won't be able to. But there's the trickle effect. Once technology reaches the hands of one group, companies will start offering cheaper versions of the same technologies to those who can't afford the high end versions. And these are going to be at least 2 or 3 years behind, or you can say at least 1 or 2 generations behind, the high end. Which is why you see iPhones at one end of the spectrum and a Redmi phone at the other end.
Now the govt can't do anything about the high end segment, but they can do something about the low end. But the real back breaker will be the low end segment because of the volumes, since at the high end, taxes can take care of some of the pressure.
India's overall GDP is still going to be small and we will still continue to have a weak exchange rate for a long time. It's expected that at constant prices, India's per capita income will be around $5000 in 2040, which is just $1000 over the threshold for calling ourselves an upper middle income country, something China achieved in 2011. So at constant prices, at $7.5T, our GDP will be half the size of today's China in 2040. But if the market climbs to even 50 million high end $1000 iPhone sales a year, we are talking about a forex outflow of $50B, which is half the size as our oil bill today. And this is merely iPhone sales. And 50 million is a significant underestimation. What do you think will happen if Apple ends up with a 50 million market before 2035?
But what about $300 phones? And what if the market in the 2030-35 period is 250 million a year for $300 phones? We are talking about a forex outgo of $75B. This is the low end segment.
Your PPP numbers don't matter here.
China will escape because, as an advanced economy, their yuan will find international buyers. But no one's gonna give a crap about our rupee unless we become at least close to an advanced economy, say $10,000 per capita.
What won't work is India subsidizes a massive fabrication ecosystem effort only to realize that it cann't offer the same prices as taiwan or china even while selling at cost price due to sheer scale of economies.
Actually this entire business of have a fab is a deja vu. It has happened before in 2000s.
It doesn't have to be 100% of the market. It needs to be enough that we are in a position to scale it up in an emergency so that we are not blackmailed. We are going to get into a position in the near future where public blackmail will be the main way to get something out of India. You already see that happening with China.
The Chinese made a huge mistake of not entering the electronics market, especially fab plants, even earlier that they did, which they admit. This has nothing to do with making a profit. Countries like India and China pay many times more than the profit margin of the semiconductor industry for security. Even if a fab plant makes a $1B loss every year, I doubt that's possible, it's peanuts compared to the overall security budget and will be subsidised for the sake of economic security. It's a strategic industry and making a profit is a secondary consideration.
