The definition of an “affordable” smartphone has changed in recent years. In some circles, the iPhone SE (which costs £399) is considered Apple’s stab at the budget smartphone market, and in others the Google Pixel 4a (a self-styled affordable smartphone with a £429 price-tag) is seen as cheap and cheerful.
Indian telecom operator Jio, however, has a different definition of affordable. The company recently announced the JioPhone Next, a 4G handset that the company says will be the cheapest smartphone in the world. It will arrive in September as the successor to the JioPhone 2, a BlackBerry-esque 4G smartphone that went on sale for just Rs 2,999 – that's £29.
While the JioPhone 2 ran Kai OS, a bare-bones operating system based on Linux designed for similarly bare-bones devices, the Jio Phone Next will ship running Android. This is unlikely to be full-fat Android – XDA Developers has spotted that it appears to be using the Go-version of the Google Camera app, which indicates it shares some similarities with Google’s low-powered Android Go operating system – but it will offer users access to Google services such as the Play store and Assistant.
Google doesn’t charge OEMs for a Google Mobile Services (GMS) license to access these services, but obtaining the certificate from an authorised third-party testing facility will incur fees, which reports suggest could be up to $15,000 per model.
And that’s before you even consider hardware costs. Full specs of the JioPhone Next are yet to be confirmed, though Jio’s company president and managing director, Mukesh Ambani, has previewed some of the smartphone’s key features, which include a camera with HDR support and built-in Snapchat filters and baked-in 4G connectivity. What’s more, according to the rumour mill, the device will also have a 5.5-inch screen, quad-core processor, 16GB of expandable storage and a 3,000mAh battery.
This, according to CCS Insight’s Wayne Lam, means the device likely costs at least $44.50 to make, or $40.50 if the memory configuration is halved. “However, this is before factoring in other costs like IP, licensing and any other beyond-BOM [bill of materials] cost that make up the overall cost of goods sold,” he says.
Biju Nair, executive vice president and president, global trade-in and upgrades at insurance firm Assurant, says that the “minimum cost for a fully licensed product with reasonable quality and having features of a true smartphone is typically around $75”.
Despite this, reports suggest the Jio Phone Next could retail for just Rs 4,999 – that’s only £48, or $66. So how on Earth is that economically possible? The answer, simply, is it’s not.
According to Nair, it’s likely the handset is probably going to be sold at a loss. It will be subsidised by Google and/or Jio as the two companies push to expand their reach in the world’s second-largest internet market. Jio already has a history of heavily subsidising services to acquire customers; when it initially launched its mobile business, it gave the service away for free. The company duly added more than 100 million customers in six months.
“It could be a loss,” Nair says. “However, it could help Jio convert some of its feature-phone subscribers, as well as subscribers from competitors, into Jio smartphone users. Jio’s ultimate goal is to have its consumers pay for content, rather than access voice and data services,” he adds. And that’s especially true if people can be persuaded to load Jio-specific software.
This is a viewpoint shared by Paolo Pescatore, founder of analyst firm PP Foresight, who says that there is more to Google and Jio’s partnership than simply a low-cost smartphone. “The bigger opportunity is getting the next 200-300 million users who are not connected to buy their first smartphone,” he says. “This in turn will drive new revenue from connections and services. Hence why this device is packed with features and the full skew of Google Play. There is more revenue to be generated from selling services to users which increases stickiness.”
While everyone we spoke to says building a phone for less than £50 is horrendously difficult, Pescatore believes it won’t be long until we see even cheaper Android smartphones, and potentially even ones with 5G. “As with everything there is a compromise on features,” he says. “In essence, people still want a robust smartphone that can make, receive calls and access data with no connection issues.”
That’s particularly true in India, which still has around 540 million people who do not own a mobile phone. For Google, this is an untapped market that it could attract to its Android ecosystem and boost its existing global base of 3.1 billion users. And for Jio it’s a chance to unseat Xiaomi to become India’s number-one smartphone brand.
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This article was originally published by WIRED UK
