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Data is cheap in India, but what about smartphones?

We need reliable smartphones in the entry-level segment

Smartphones have been hailed as the innovation of the 21st century. And for all the right reasons, I do agree with this popular statement. They have pretty much changed the way we do things and the way we interact with the world. To put it in a line, smartphones have managed to fit a world full of technology, possibilities and opportunities in a device that you can fit in your denim’s pockets.

Unfortunately, smartphones have still not penetrated the bottom of the pyramid population. The market growth hasn’t been inclusive of the entry-level segment. Don’t get me wrong! Phones have gotten cheap and their affordability has placed them in lots of hands around the world. But allow me to tell you how they’re still evading a huge chunk of the population by taking an example of India and its burgeoning feature phone market.

India’s love for feature phones

As you stop throwing money at a smartphone, it quickly starts losing out on features. And as we reach the price mark of INR 5000 and less (USD 72 or less), smartphones lose all their sheen and offer an unreliable, botchy experience (most phones so far have at least) . A shabby display, laggy UI and crippling battery life are just some of the most common problems faced in this price range.

And I agree, it’s not easy to make a well-functioning phone given how tight the budget it. But this is exactly where an opportunity, as rich as ‘El Dorado’, lies. Reliable and consistent smartphones under the budget of 5,000 have solid potential in developing countries (especially India) where budget is one of the main constraints.

According to a research report by Counterpoint, the bottom of the pyramid population across the world simply can’t afford a smartphone. Apart from affordability, factors like battery backup and general endurance also keep this population far from the reach of smartphones.

Why do people still prefer feature phones?

We have seen smartphones within the budget of INR 5,000 that have claimed to offer great bang for the buck. Interestingly, one of these brands was Reliance’s own LYF. LYF smartphones were meant to be entry-level smartphones that offered 4G capabilities at a very affordable price, as low as INR 3,000.

But given how aggressively they were priced, LYF phones never really took off. That and competition from other Chinese brands translated into bad news for them. I personally had tried a couple of LYF phones back in 2017, but none of them seemed promising.

More than a billion feature phones will be sold around the world in the next 3 years.

Reliance realised that with its limited exposure to manufacturing affordable smartphones (which is admittedly more difficult than making feature phones), it had to switch its focus to ‘smart’ feature phones. This is something Reliance achieved with their JioPhones that ran on Kai OS. But considering how aggressive Jio is, we won’t be surprised to see an entry-level smartphone from them. Second time’s the charm probably!

SUGGESTED READ: KaiOS and Jio are ready to serve 4G goodness to the unserved

Xiaomi & Samsung can bridge this gap (maybe even Jio)

To make affordable phones that are reliable, a company needs to nail 3 things (amongst others): economies of scale, minimal selling overheads and reliable local suppliers (import duties make phones more expensive). An amalgamation of the above three factors can be the key to making smartphones even more affordable.

In my opinion, there are two brands that can serve this gap: Xiaomi & Samsung. Xiaomi & Samsung have years of experience in making quality phones at affordable prices and have developed a brand value amongst a majority of Indians.

Samsung & Xiaomi also have factories in India that are in a great position of exploiting economies of scale. To give you an idea of the quantum, Samsung’s factory is the largest smartphone factory in the world and will be able to produce up to 120 million smartphones by the end of 2020.

Xiaomi, too, has enormous capacity amongst its 6 factories in India that it’s capable of producing 2 smartphones every second. Its also about to launch its 7th factory in India which will be a spacious 1 million sq ft facility that will boost its production by 50%.

PCBs contribute to up to 50% of the cost of making a smartphone.

More importantly, Xiaomi has now also started assembling Printed Circuit Boards (PCBs) in India with the help of Foxconn. PCBs attribute to up to 50% of the making cost of a phone. This action was a reaction to the imposition of a 10% duty on imports of populated PCBs, camera modules and connectors. This imposition was enforced keeping ‘Make in India’ in mind to promote local sourcing and manufacturing.

But apart from Samsung & Xiaomi, there are some hopes from the incumbent feature phone player; Jio, to bridge this gap too.

We also got in touch with Ershad, an industry veteran and the Editor-in-Chief at Mr. Phone, to ask him what he thought about this gap and who might actually be able to suffice it. This is what he had to say:

“Did you know that the Jio phone is the overall market leader across handset types in India in 2018 with a 21% overall market share? Not Xiaomi, not Samsung but Jio. This means there is still a massive opportunity for the growth of low-cost smartphones. I wouldn’t be surprised if Jio capitalises on this lead and puts an entry-level smartphone in the hand of every Indian. I’m surprised that, despite all the efforts, bigger brands like Xiaomi and Samsung couldn’t do much to convert the feature phone audience and introduce them to their first smartphone. Heck, Nokia is trying to capitalise on the feature phone market. I think the idea should be to create a phone ground up with India-specific features and offers that can entice users. There is no point trying to force-feed Android Go because first-time smartphone users will rarely care. In that price segment folks aren’t looking at finesse or speed per se, but for most features at minimum money. Hope someone takes this challenge up and I believe it will end up being Jio again. Their grassroots-level local agents are belligerent and can actually sell more phones than any e-commerce store or organized retail channels.”

Redmi Go is a step in the right direction; we need more phones

Redmi Go was a recent attempt by Xiaomi to make an entry-level phone with all that Android had to offer. The phone was a marriage of lightweight Android Go OS and Xiaomi’s minimal hardware. The phone wasn’t a runaway success (we’re assuming it wasn’t, because the company hasn’t made any claims) but was still a pretty decent phone for the first time smartphone user looking to upgrade from a feature phone.

We need more smartphones in this budget that can give feature phone users a solid reason to shift to them. There have been cheap smartphones in this price range, from both local & Chinese manufacturers, but none have inspired confidence in terms of endurance and quality. This is where Xiaomi, Samsung, and Jio, companies with immense brand value and consumer trust, can make a move.

Innovation is no longer elitist; we hope it trickles down further

Innovation in the world of smartphones, for the longest time, was reserved only for flagship phones. But since 2018, we’re starting to see ‘Industry firsts’ in mid-range and budget phones too. For instance, the Galaxy A9, a mid-ranger, was the first phone in the world to have a quad-camera setup. There are other instances that prove the fact that innovation is no longer privy to the phones at the top of the pyramid.

Hopefully, this attitude of innovating trickles further down the price chain and brings around a whirlwind of change in the entry-level smartphone market too. I know innovation means tons of money into R&D and when you’re targeting the lower end, it doesn’t seem to make a lot of sense. But at the same time, there are volumes to be captured if a magic concoction of hardware and software is ever worked out for this unserved market.

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