As the world continues to evolve at an accelerated pace, high speed connectivity has become crucial to growth. However, over 500 million Indians still rely on the traditional 2G network to stay connected, obscuring the state of cellular data connectivity while increasing the country’s dependence on feature phones. Currently, 51 per cent of Airtel’s customers use the 2G network.
A large part of this dependence can be attributed to the reluctance to upgrade to newer versions of network technology. People who use feature phones seek both disposability and low value. This is because 2G phones have certain features that smartphones lack, such as affordability, durability, simplicity and extended battery life. While some of these users are unable to afford a smartphone and a monthly internet plan, others simply refuse to convert.
Reliance Jio, known for its disruptive market strategies, has been eyeing this set of non-converts and has recently announced the launch of a 4G smartphone in partnership with Google. Christened JioPhone Next, the new affordable smartphone will be available starting September 10, 2021. The launch price has been kept under wraps for now, but it is expected to be announced closer to the launch date. Analysts are expecting an aggressive price range of Rs 2,500-Rs 3,000 that could convince many 2G feature phone users to switch to smartphones, creating a stir in the industry. JioPhone Next will unleash competition in the entry-level market, currently dominated by players such as Redmi, Realme, Micromax and Lava.
In terms of features and specifications, it is not clear yet which version of Android the device will use. In addition to the Play Store and a voice assistant, the smartphone will have OS Read Aloud and Translate Now capabilities. With Read Aloud, the system will read on-screen text when a user taps the “listen” button. Alternatively, Translate Now would enable users to translate any text shown on the screen. Both new features are available for use on websites, apps, messages and photos. The phone is also expected to give users a wide choice of Indian languages.
The phone will come with a high-dynamic-range-enhanced camera and feature an AI-enhanced low-light mode. As part of its partnership with Snapchat, Jio will also integrate augmented reality (AR) experiences with Indian-specific AR filters built into the default camera app.
The telco claims that JioPhone Next will offer a superior consumer experience compared to Jio Phone 2, which was launched in 2018 and primarily marketed to consumers unable to afford 4G smartphones.
Potential market size
With India’s total population estimated at 1.39 billion, Counterpoint Research estimates that there are 850 million cell phone owners, and the total smartphone penetration rate is still at 61 per cent. Approximately 540 million “unconnected” users live in the country, including young and elderly people, as well as those who cannot afford smartphones. Another industry estimate suggests that the addressable market for the new Jio device is as high as 140 million-150 million. This includes about 60 million-65 million existing JioPhone customers who are likely to upgrade. Besides, Jio will be aggressively targeting Airtel and Vodafone Idea 2G feature phone users.
While Jio evidently intends to dominate the market with its third device, the move will also give an opportunity to Google to re-enter the market after having little success with Android One and Android Go in the past. JioPhone Next features many Android features typically reserved for Google’s own Pixel phones. In this alliance, Jio will be responsible for driving traffic to JioPhone Next, while Google will be responsible for the underlying technology.
Interestingly, the partnership between Jio and Google encompasses more than the sale of smartphones. With the help of Jio, Google is hoping to unlock its most important emerging market in the digital domain. In 2018, Google stepped up its investment in India with its $10 billion India Digitisation Fund, half of which was used to purchase a 7 per cent stake in Jio. While Google has so far remained in good standing with local law enforcement by complying with all new laws, the US technology giant has recently been subjected to an increased level of regulatory pressure post the Indian government’s tightening of its grip on media and social media. For Google to succeed in India, collaboration with domestic players is crucial.
Using this partnership with Jio, Google’s enterprise wing will explore a wide range of growth opportunities in the country. In exchange for its partnership, Jio has agreed to shift its core retail business to Google Cloud’s infrastructure, a deal that will generate at least $1 billion in revenue for Google. Beyond Google, Jio represents an invitation to India’s promising digital economy for a number of US tech titans, such as Facebook, Snap and Qualcomm, most of which have already invested in the telco.
Impact on competition
In the entry-level segment, JioPhone Next will be competing with Nokia C3, Realme C20, Redmi 9A, Lava Z1 and Itel A23 Pro, among others. Nevertheless, it is believed that the competition will help indigenous brands thrive by pushing them to utilise similar models. Original equipment manufacturers can also consider launching in markets outside of India, such as the Middle East and Africa.
Bharti Airtel, on the other hand, has stated that it is unlikely to be impacted by the upcoming Jio-Google 4G smartphone. In fact, Airtel believes that its strategy, which emphasises offering world-class services to quality customers, will be complemented by Jio-Google’s introduction of a budget smartphone.
Potential win-win for all stakeholders
With JioPhone Next, users will have a greater incentive to consume audio and video content, since there will be a host of new features and interactive services available. In addition to users, the smartphone will benefit over-the-top (OTT) players. If successful, JioPhone Next will help convert up to a 100 million users of cheaper smartphones into consumers of e-commerce and apps. To fully capitalise on the opportunity, OTT players will need to think about the entire ecosystem and ensure that their content is available on the cheapest smartphone hardware possible.
In the entry-level smartphone market, devices under $75 are powered by MediaTek, Qualcomm and Unisoc chipsets, which are made on mature 28nm processes. Chipmakers have the opportunity to make powerful and energy efficient chipsets for this new market of first-time smartphone users. Display makers will also see new opportunities, as these entry-level smartphones’ LCD screens will be bigger than those of feature phones. Cover-glass-makers such as Corning, Asahi, and others have a part to play here. Camera module manufacturers will also have a big opportunity to introduce the first affordable smartphone camera sensor, enabling a more appealing photography and videography experience for the first-time smartphone user.
JioPhone Next opens up a world of possibilities for the company. But the company will have to be cautious that the phone does not meet the fate of its predecessor. Despite its aggressive marketing, JioPhone 2 failed to meet expectations in a rapidly expanding market flooded with smartphones from China. A Counterpoint report from the second quarter of 2019 showed that JioPhone’s market share declined from 47 per cent in the second quarter of 2018 to 28 per cent within a year of launch. Industry experts believe that Jio Phone 2’s higher price at Rs 2,999 (compared to JioPhone at Rs 1,500) forced people to consider other options.
For JioPhone Next to be a success, it must fulfil its promise of delivering high-end features at ultra-affordable prices. With Chinese players dominating the market, Jio must present an attractive value proposition in order to woo those 100 million customers who are yet to jump on to the smartphone bandwagon. s