It’s the season to ban, boycott and abandon – in just a matter of a couple of weeks we have witnessed 1,032 brands join the #StopHateForProfit Facebook boycott campaign globally, India deciding to ban 59 Chinese apps including TikTok and WeChat, while tech giants Google, Facebook and TikTok decided to leave Hong Kong due to its new security laws.
The common thread among each of these is the intertwining of geopolitics and technology. Both continue to impact each other’s sphere of influence. With the rise of nationalistic sentiments, countries are increasingly scrutinising potential national security threats posed by data leaks, and are subjecting software and hardware companies, especially those owned and operated by foreign companies, to comply with stricter checks, norms and policies. In some cases we've seen outright bans.
At least, that appears to be the case with India’s Ministry of Electronics & Information Technology’s blanket ban on 59 mobile apps – all from Chinese companies – that it said were “engaged in activities prejudicial to sovereignty and integrity of India, defence of India, the security of state and public order”.
Geopolitics and border disputes
China and India – the two largest Asian economies, both nuclear powers that share a border spanning 4,056 kilometres – have had frequent but low-intensity flashpoints amid geopolitical tension. They last went to war in 1962, when the Dragon had caught the Elephant off guard, securing de facto control of Aksai Chin in the Himalayan region, an area claimed by both countries. But to their credit, the two nations have jointly engaged in confidence-building measures and signed multiple agreements that have prevented the use of firearms at the border to prevent any escalations. No rounds have been fired at the Sino-Indian border in Ladakh since the war’s end 58 years ago.
An imbalanced economic tango
On the economic front, bilateral trade has rapidly expanded between the two nations to the value of $85-$95bn in recent years, although the trade deficit of US$50bn is largely in China’s favour (despite China being the third largest market for Indian exports in 2019). This has always been a point of understandable concern and contention for the Indian administrators. India imports almost 70% of its bulk drugs and intermediates, 37% of electronic components, 45% of consumer electronics, and 44% of air conditioner and refrigerator parts from China.
Chinese hardware brands like Xioami, Oppo, Vivo, Realme and OnePLus controlled over 80% market share in India as of early 2020. Two of these brands are major sponsors of cricket in the country, a sport which more akin to a religion and one that binds the heterogeneous nation. The yawning deficits are not just limited to trade alone but also in categories such as foreign direct investments in startups and tourism – in both cases, China has an upper hand.
Why a blanket ban and why now?
It is important to have this geopolitical and commercial context as background when discussing the recent ban on Chinese mobile apps in India, when there hasn’t been any significant change to the way that these apps work in the last three months. Also, while TikTok India categorically denied sharing any information with China, if there was a genuine case against this particular app, as is apparent in other parts of the world, why punish the other 58 without a thorough investigation? It’s very likely this decision is a political one and a response to the current tensions between India and China – tensions which recently led to the first deaths along the disputed border in over 40 years.
Why not a larger ban, for a bigger signal and impact?
Whilst the jury is out on whether this blanket ban is legally tenable, if the objective was to send a signal to the folks across the border and showcase total economic self-reliance, why not be bold and go the distance? India could have banned major mobile apps and startups in India that have raised over $4bn from Chinese investors such as Tencent, Alibaba and Ant Financial, including Zomato, PayTM, Quikr, Ola, Flipkart, MakeMyTrip, Dream 11, Rivigo, Udaan, Oyo, PolicyBazaar, Delhivery; some of the more prominent of the 18 out of the 30 unicorns in India that run on money raised in China.
What of the major Chinese smartphone and device brands that not only own 80% of the category in India, but are among the biggest sponsors/advertisers in the country?
While we’re at it, why not ban other American and European consumer goods that are manufactured in China such as Apple, Nike or Adidas?
How and where does one draw the line on ’Made in/by China?’ What brands deserve a ban or a boycott?
While I personally am not sure whether these kneejerk bans and boycott stunts will do anything to resolve the ongoing geopolitical tensions at the Himalayan border (they are better tackled diplomatically), they definitely help play to the jingoistic, nationalistic gallery and could have potential implications and ramifications for Indian creators, brands and the startup ecosystem.
Ban and boycott to copy and paste?
Given India’s dependence on Chinese imports in critical areas such as drugs, electronics and machinery as well as China being India’s third-largest export market, the Indian economy should be prepared for potential economic tremors should the Chinese government decide to retaliate with counter bans.
On the flip side, some Indian entrepreneurs believe that while it wasn’t the intended objective of the mobile app ban, the government has “actually provided a huge opportunity to startups to leverage the App ban [to] create new and innovative apps”, as Kiran Mazumdar Shaw, chair and managing director of Biocon put it.
Read more at: https://yourstory.com/2020/06/indian-business-leaders-and-tech-startups-reactions-chinese-apps-ban. For this community, the ban serves to validate of prime minister Modi’s ambitious call to ’Make In India’, an initiative kickstarted four years ago to increase economic self-reliance through local innovation, manufacturing and development, recently bolstered through the $280bn Atmanirbhar Abhiyan Package in May this year as a way to help India recover from the impact of coronavirus.
If one has to go by the indications of the last week, all one has witnessed is the limited success of controversially developed me-too, copycat products. Several local TikTok wannabes had reported a massive spurts of downloads and usage in the immediate aftermath of this ban (Chingari enjoyed 300,000 downloads per hour, with 850,000 users viewing 2.2m video swipes per hour) but it is still a far cry from the massive success that the original app enjoyed pre-ban.
TikTok, which had 500m downloads (a quarter of its global install base) in India reached more than 40% of the total smartphone user base in India; post-ban that has dropped to about 10% whilst Chingari and Mitron have grown to 5%, Roposo to around 7% and Sharechat to about 15%.
In terms of usage and time spent, pre-ban, Indian users used to spend more than 50 minutes a day on TikTok. While that has dropped to about 5 minutes, usage on the Indian apps range between 5 to 22 minutes – still a long way to go before they emulate TikTok’s previous success.
For the sake of the 1.2m Indian creators that flocked to TikTok, I do hope that localized counterparts scale up and offer equivalent income-generating opportunities. The majority of these creators were non-English speakers from rural towns, who don’t have the privilege of having an acceptable cultural and economic background. TikTok provided them with an outlet to express themselves, and a unique income stream as influencers that collectively stood at about $16m.
These local apps may be spared from competing against China’s TikTok but they are likely to face stiff competition from Reels, Instagram’s “response to Tik Tok” (according to Adam Mosseri) and YouTube’s Shorts, likely to launch soon in India. The two global digital giants are likely to use this opportunity as a testbed to lure the Indian creators that had flocked to TikTok, before releasing at scale in other markets.
In the meantime, Reliance Jio, which struck 12 deals in the last 12 weeks to raise over $15.6bn from some of the largest tech and private equity giants in the world, has launched two me-too products, JioMeet and JioChat. The user interfaces of either app (UI) seem to be very similar to Zoom and Whatsapp respectively and could potentially face legal actions – but with a war chest from heaven, I suppose that would be the least of Ambani’s concerns.
Interestingly, my LinkedIn feed has been decorated with controversial chats about whether these copycat innovations are smart moves or shameless, desperate acts wearing the garb of ‘atmanirbharta’ (self-reliance) amid a nationalistic environment.
A chance to recalibrate through policy and competition-driven innovation
Whilst the early response points towards lazy, copycat innovation, notwithstanding the ban on the 59 Chinese apps there is a genuine opportunity for Indian startups to innovate in these unprecedented times as the world recalibrates itself – to not only solve local problems but to develop something that can be scaled and adopted globally.
It is important for the ecosystem in India to move away from the temptation to create the Indian version of western or Chinese successes but to create from within. And as Ronnie Screwvala, a successful Bollywood producer & co-founder of upGrad, said in a recent piece, “the only and long road to creating a culture of innovation is education, coupled with a robust soft-skilling ecosystem that is outcome-driven and accepting of failure as a probable outcome”.
To encourage this change in mindset and approach, the Indian government must go beyond creating chest-thumping, protectionist environments and focus on creating an environment that fosters healthy local and foreign competition; one that has investor and founder-friendly policies. It must create a regime that protects and respects intellectual property; encourage entrepreneurship within the education system and roll out the much needed and anticipated data protection bill that protects the nation, it’s companies and its citizens.
Bans and boycotts may be in vogue today in our increasingly polarized world and whilst it can amplify political posturing, it will not it serve as a long term geopolitical solution, nor can it be a long term strategy to drive innovation. Lee Raymond, the famous ex-chief executive officer and chairman of ExxonMobil said it well: “Without competition, the spectacular development of technology that we have seen in the last one hundred years in this country would not have happened.”
Prantik Mazumdar is the managing partner of Happy Marketer