Silicon Valley has poured billions into India since the start of the year, with Facebook and Google leading the charge with investments of $5.7bn and $4.5bn respectively.
Chipmakers Qualcomm and Intel also struck deals in the country, along with a string of leading US tech-focused private equity firms.
All of these investments went to one company: Jio Platforms, the telecom-and-digital services arm of Mukesh Ambani’s sprawling energy-to-retail conglomerate Reliance Industries, which has in four years grown into India’s largest telecoms operator, with 388m users.
With the help of its new investors, Jio now aims to dominate India’s digital economy by moving up the tech stack with everything from ecommerce to streaming ahead of an IPO within five years.
For Silicon Valley, the alliance with India’s would-be national champion marks their safest foothold yet in the highly promising market, and comes as officials in the country move to curb rival investment from China.
“These companies are now betting aggressively on India, so they don’t find themselves in a situation where the market grows over the next 10 years and they’re out,” said Satish Meena, an analyst at Forrester Research. “They’re buying future access.”
So what exactly do the West Coast tech companies have planned for India?
India is Facebook’s largest market, with more than 300m users plus 400m on WhatsApp.
Since investing in Jio in April, the two companies have launched a major ecommerce initiative in the region, integrating Reliance’s platform JioMart into WhatsApp to connect millions of customers with local retailers selling groceries and essentials.
Analysts say that using WhatsApp with JioMart will allow it to tap the fast-growing market for online transactions, a promising new revenue stream.
“There’s always a conversation on ‘Can the next 300m, 400m, 500m people come online?’ But equally it’s important to focus on the other side of the equation . . . How do we fully unleash the potential by bringing the next 60m small businesses online as well?” said Ajit Mohan, Facebook’s managing director for India.
Mr Mohan added that the move represents a further evolution of WhatsApp’s growing importance as a business tool in the country.
“For a lot of small businesses, being online in India today means their number on WhatsApp,” he said. “When you walk around . . . invariably you start seeing the signboard with the WhatsApp logo and the number.”
Currently less than 20 per cent of Facebook’s revenues come from the Asia-Pacific region, in part because India’s online advertising market is comparatively small.
The company has also tussled with Indian regulators in the past, who in 2016 blocked its “Free Basics” online access plan, and WhatsApp Pay is still yet to secure regulatory clearance.
Separately, WhatsApp last week announced plans to branch into insurance and credit in India, while Facebook this month launched Instagram Reels, a short-video competitor to the wildly popular Chinese app TikTok, which was banned in India in June.
Google plans to work with Jio to produce new low-cost smartphones with Android-based operating systems, in the hope of gaining a foothold in the world’s fastest-growing smartphone market.
India has 500m smartphone users and is expected to grow to 700m by 2022, according to Counterpoint Research, while a further 350m currently use simpler “feature” phones.
Number of users on Jio Platforms
By joining forces with Reliance, which has a record of gaining market share through low-cost and heavily discounted products, analysts said Google is betting that the pair can come up with a phone cheap enough to attract the hundreds of millions of Indians still not on smartphones.
“We see the chance to have an even greater impact than either company could have alone,” Sundar Pichai, Google and parent company Alphabet’s chief executive, said this month.
Cementing a place in the device market will also put Google in prime position to promote other services, said Arvind Singhal of consultancy Technopak, from its fast-growing payments app — which has nabbed market share since WhatsApp’s product was delayed — to its maps.
“The probability of your phone becoming the phone of choice for most users in India becomes very high. Your penetration becomes very high,” he said.
Intel and Qualcomm each took smaller stakes in Jio through their investment arms, for $253m and $97m respectively.
But the deals give the chipmakers a strategic edge, particularly after Mr Ambani announced this month that Jio was developing its own suite of 5G services.
“It’s not about just money which goes in,” said Rajen Vagadia, president of Qualcomm India, which already supplies parts for Jio’s phones. “It’s about collaboration, like engineering support, product knowledge, market access — all these things come as part of the package.”
The investments serve as a form of “soft pressure on Jio” to buy the chipmakers’ products, said Neil Shah of Counterpoint. San Diego-based Qualcomm could sell semiconductor chips for Jio’s 5G push with Intel supplying its mobile base stations.
“The investment is driven towards technology that Intel Capital and Intel cares a lot about,” said Nivruti Rai, head of Intel India.
Ultimately, everyone from the chipmakers to the internet giants is betting that success in India in the coming years can be replicated in other parts of the world, such as future growth markets in Africa.
“This massive population in India is one of the best grounds to prove something which is scalable, affordable, and yet profitable,” Mr Vagadia said. “I think every single company has seen that.”