Google, Jio Come Together To Capture Market Both Struggled To Crack

Google and Reliance Jio Infocomm Ltd. in the past separately tried capture the low-cost smartphone market in India—but failed. They have now come together to create a new Android-based operating system to develop affordable smartphones.

Google, which invested about $4 billion in Jio Platforms Ltd., will be building new 4G/5G smartphones as Reliance Jio looks to make India "2G mukt" (2G-free), Mukesh Ambani, Asia's richest man, said in his address to shareholders of Reliance Industries Ltd. “As India is standing at the doorsteps of the 5G era, we should accelerate the migration of 350 million Indians, who currently use a 2G feature phone, to an affordable smartphone."

Reliance Jio's LYF smartphones and Google's Android Go handsets didn't find many takers, according to Tarun Pathak, associate director at Counterpoint Research. And while Jio's cheap data boom has driven internet usage, about 40% of the nation's 1.15-billion mobile phone subscribers own smartphones, as per IDC . So there's a potential market for a low-cost smartphone.

Still, Pathak said, a low- cost 5G under Rs 10,000 is still far away as costs components are high. But the partnership, he said, could give both the companies a headstart in 5G technology, besides increasing penetration of low-cost smartphones.

Jio created a buzz with its 4G-feature phones powered by KaiOS developed by Hong Kong-based KaiOS Technologies. JioPhone became the best-selling feature phone in the first quarter of 2018, according to a Counterpoint report. But soon lost market share as shipments declined due to high inventory.

The feature phone market is led by China’s Itel brand, followed by Lava, Samsung, Nokia and Micromax. Pathak said JioPhone, however, still accounts for a fifth of the pie.

The Jio-Google combination could disrupt the feature phone and entry-level smartphone market. Sundar Pichai, chief executive officer of Google, said during Reliance AGM that the collaboration will focus on increasing access for hundreds of millions of Indians who don’t own a smartphone while improving the mobile experience for all. Pichai, in his earlier visit to India nearly three years ago, had said the country needed a $30 or about Rs 2,200 smartphone.

“Jio-Google low-cost smartphone could expand the smartphone market in the country,” Faisal Kawoosa, founder and principal analyst at technology research firm TechArc said. An entry-level smartphone at Rs 1,500-2,000 will be a game changer for the industry, he said. “This could slowly lead to death of feature phone in India.”

Smart feature phones are favoured by India's poor. They aren’t only inexpensive but also have easy-to-use physical keypads and long-lasting batteries.

Pathak said it's to be seen how the partnership works and how the overall software and hardware integration takes shape. “There will be users who might still be comfortable with feature phones in India due to literacy, familiar form factor, and other barriers," he said.

But he agrees that the partnership will accelerate the shift from feature phones to smartphones with pricing and technology that Jio-Google can bring to the table.