Global networking infrastructure is going local

More nations are seeking greater control over how the world’s data flows, potentially altering the gate-keeping network infrastructure economy

On August 11, the government of India notified the Digital Personal Data Privacy (DPDP) Act, 2023. In addition to this, it is currently holding consultations for the upcoming data and technology legislation, the Digital India Act. These two regulations, taken together, will bring a holistic range of technology laws to the country and bring India in line with an increasing number of geographies, such as the European Union, Singapore and the United States, in regulating technology and related fields.

In all of this, one key area that is set to come under fire is the regulatory impact on networking infrastructure. This is so because of multiple reasons — increasing geopolitical concerns around the transfer and integrity of data, cyber warfare, localisation of nation-wise data and the rise of the demand for increasingly granular manufacturing of equipment across the world.

India is increasingly attracting brands to make devices in the country, through multiple PLI or production-linked incentive schemes.

THE STATE OF NETWORKING HARDWARE

Just like semiconductors, networking hardware is also majorly driven by China. A large chunk of routers, data centre chips for processing, memory and storage, and even network fibre-end components are designed by legacy firms with historical capacity in these fields. These designs have typically been given by firms such as Cisco, Broadcom, Texas Instruments, Qualcomm and others to manufacturing partners in China, who have built and supplied them to these companies and their clients.

The balance of the network infrastructure ecosystem has lasted for decades now, albeit on the thin ice of cross-border collaborations.

This balance of network infrastructure ecosystem has lasted for decades now, albeit on the thin ice of cross-border collaborations. Now, however, this multi-billion-dollar industry faces multiple points of stress and, most importantly, geopolitics-driven localisation.

The most obvious point at which this industry came under duress was when former US President Donald Trump slapped sanctions against Chinese tech conglomerate Huawei, barring its equipment from all government and eventually public networking infrastructure. These sanctions eventually progressed to include consumer hardware too, leading to a global decline for the then-rampant Huawei around the world. This, in turn, also led to the decline of fellow China-based brands such as ZTE, even in India.

Today, India is increasingly attracting brands to make devices in India, through multiple production-linked incentive (PLI) schemes. In cases where the government has not rolled out incentive-driven manufacturing, legislation is driving us towards a trusted geography approach, giving us several nations whom we may trust.

WHY IS THIS IMPORTANT?

At the epicentre of this shift is one big gaping concern: cyber security. One of the key reasons why the US-China soft conflict began was the allegation from the US that China was conducting cyber espionage, by secretly installing ‘backdoors’ to access sensitive US government data through networking equipment supplied by it. Huawei was also alleged to have close ties to China’s government, which it has denied.

These concerns expanded to India, too, leading to the government banning nearly 500 mobile applications that were said to have ties to Chinese data servers. As a result, India began to see an increasing requirement to localise its networking infrastructure as well. One of the biggest moves for this has come in establishing Micron, the US chipmaking firm, as India’s first benefactor of semiconductor incentives. Micron, which began work on its factory in Sanand, Gujarat, in September, will be testing and packaging NAND flash memory and storage chips from India, as early as the end of next year.

This is essentially the first step towards localising India’s networking infrastructure, which will eventually see chips being made here in the long run, leading to not just assembly of networking routers and server infrastructure in the country, but full-stack assembly.

NOT JUST HARDWARE

Such moves would not only benefit hardware firms but also the software end of networking. In an interview with a business newspaper last month, Tom Leighton, Co-founder and Chief Executive of the global content delivery network (CDN) operator Akamai Technologies said, “If you are a global company, you have got to comply with all of the tech regulations around the world. This gives us a chance to come in because we already have global technical skills that we can leverage across a large number of customers. Financially, this makes more sense, to be able to go to a company and manage their data-driven operations in different countries. That is added value we can provide, which would otherwise be harder for individual companies.”

Localising India’s networking infrastructure will lead to not just the assembly of networking routers and server infrastructure but also full-stack assembly.

Operating some of the world’s largest networks of delivering content such as web traffic, payments and more around the world, companies such as Akamai and Cloudflare are best poised around the world to witness this shift in how localisation of networking takes place.

Going forward, an increasing volume of hardware will need localisation. India’s DPDP Act has already proposed a ‘blacklisting’ approach to storing data, legislatively suggesting that certain nations will not be sanctioned for storing the data of Indian individuals.

With concerns around data sovereignty growing around the world, more regulations like this will grow and the global networking infrastructure is also likely to see increasing localisation and fragmentation.

By Vernika Awal

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