Why Reliance Jio’s Upcoming Android Go Smartphone is Bad News for a lot of Companies

by: - Last updated on: February 1st, 2018

Reliance Jio has swiftly transitioned itself into a household name in India in just little over a year. The telecom operator has been foraying into a series of new markets by undercutting incumbents and plugging its mobile network services as the catalyst to build tempting offerings for customers. One of its most recent venture — the JioPhone has already managed to surpass the long-standing competition in the feature phone space with a single variant and in a time span of merely five months.

Jio Happy New Year 2018 Offer

Reliance Jio has now decided to extend its handset portfolio. In partnership with chip maker MediaTek, the telco will be unveiling an entry-level Android Go powered smartphone within the next few months. While that’s mostly good news for buyers, it will be a harbinger of troubled waters for a lot of other companies in various sectors.

Before we discuss that, here’s what we know so far from speculations and the official announcement. Reliance Jio is expected to introduce an Android-powered smartphone sometime later this year. It won’t run on the Android software you’re familiar with. Instead, Jio has opted for Android Go, a lightweight fork of its beefier counterpart. Android Go also comes with a specialized, trimmed-down set of Google apps (like Files Go) which are designed to function more reliably on underpowered hardware.

Android Go is limited to smartphones with 1GB of RAM or less. Therefore, we can safely assume that the Jio’s forthcoming handset will be priced well below the $75 price bracket. In addition to that, it will be powered by one of MediaTek’s new lower-end chipsets — MT6739, MT6739, and MT6580. Considering the company’s previous approaches, Jio will probably bundle a multitude of complimentary offers and plans for “effectively” bringing down the cost further.

There are primarily three markets where we anticipate Jio’s Android smartphone to have a considerable impact — telecom, smartphones, and mobile chipsets.

jiophone

According to Counterpoint Research, Reliance Jio’s feature phone, JioPhone accounted for more than 25% of the market in the last quarter. And all of these devices are locked down to the operator’s own network which has allowed the company to establish a strong foothold in the industry in a rather short spell. More importantly, this market share represents how expeditiously Jio is pushing its services and acquiring users with the help of a subscription model. It’s not just about the cheap tariffs; you’re getting a whole package.

The smartphone, Jio is planning to launch will, more or less, follow a similar route. Whoever purchases it will be directly investing in Jio’s entire platform of services, mobile network and of course, the hardware itself. And if the telecom operator decides to carrier-lock this as well, every sale will ensure an active subscriber for at least a year.

As a result, the move will further affect rest of the telecom players who are already bleeding numbers. Leading incumbents such as Airtel, Vodafone, and Idea have announced strategic partnerships to boost sales. However, none of them have been as effective as Jio thanks to the lack of a complete ecosystem.

Jio will likely continue in the same direction by offering an aggressive strategy of data bundling with smartphones to expand its reach towards first-time smartphone buyers and entry-level smartphone customers looking for value for money products. Operators will also be intimidated by this move, which will likely result in collaboration with smartphone OEMs”, commented Pavel Naiya, Senior Analyst, Counterpoint Research.

Navkendar Singh, Associate Research Director, IDC India, added, “This will put further strain on the incumbent telco’s margins. Freebies have definitely helped new players like Jio so far, to acquire a major pie of new to telco subscribers, with its aggressive pricing. Incumbents have responded to Jio’s aggression very successfully so far (although at the cost of near term earnings). But the response by incumbents has been primarily to ring fence the current set of customers, so as to avoid high churn to Jio.

android go

Data incentives and Jio’s complementary suite of entertainment apps have played a critical role in extending its reach, and it will surely come in action with the forthcoming Android smartphone as well. By offering everything under one roof, Jio should be able to yield a much more compelling argument especially for first-time smartphone buyers and the ones who’re switching from a feature phone.

In a lot of ways, therefore, the existing phone makers might not stand a chance in challenging Jio’s arrival. Apart from collaborating with a bunch of other telcos to build a model even remotely comparable to that of Jio’s, smartphone companies won’t have a ton of options to rely on. Matching Jio’s competitive pricing will be perhaps their biggest stumbling block. On top of that, the telecom operator offers music, video, cable streaming services free of cost.

Micromax, a few weeks ago, announced that it would be soon launching an Android Go smartphone but except supposedly from an affordable price tag, it lacks any sort of supplementary features Jio offers. “This will put Jio in direct competition with smartphone players like Micromax, Lava, iTel, Intex, Karbonn, etc. making it more difficult for local players to sustain in an already crowded low margin segment”, stated Pavel.

While most manufacturers have gradually ebbed away from the sub $75 price segment, it will be still responsible for the impending phase of 4G feature phone users migrating to smartphones. By packing all the fundamental aspects in a single fragment, Jio could become a key factor in bridging that gap and bringing millions of users on board. It will sell everything from the hardware to the mobile subscription to the entertainment services people expect from a slab of screen.

With Jio’s decision to go aggressively with Android Oreo ( Go Edition), bringing the full Android OS experience on 512MB to 1GB RAM, it is trying to bridge the gap in this segment. (between 4G FP user and smartphone user) This will most certainly hit Micromax, Lava, Intex, etc. with their rather diluted bundled offerings by Airtel and Vodafone (cash back after 18 months in telco wallet, etc. ). This set of customers want simple upfront low cost on device, and reduced monthly telco spends. Jio is placed superbly to address both device cost and monthly access cost”, said IDC’s Navkendar.

mediatek chip

Lastly, the silicon industry. The Reliance Jio and MediaTek tie-up spells bad news for Qualcomm who is still struggling in the entry-level segment. As per both Counterpoint and Canalys, MediaTek and Spreadtrum amassed the majority of the stake, followed closely by Qualcomm. If Jio’s smartphone does succeed, Qualcomm’s position is only going to decline further.

It is worth noting, though, that the JioPhone runs on Qualcomm’s 205 Mobile Platform. However, it seems like the dearth of dirt cheap chipsets in the company’s lineup has led to Jio partnering with MediaTek this time. Either way, Qualcomm has missed an excellent opportunity which could have potentially provided the boost it so desperately needs in this price range.

Navkendar, however, estimates that Qualcomm still has a chance to thwart MediaTek’s lead. “Being a market leader in LTE technology, we believe Qualcomm understands the space better than anyone else and can easily tweak its offerings for emerging markets like India. Moreover, its 205 Mobile Platform is designed to bring affordable data-enabled devices to masses.”, he added.

Rushabh Doshi, Research Manager, with Canalys agrees and says, “Taking the market as a whole, Qualcomm commands close to 42% of the market, with MediaTek a distant 28%. MediaTek’s inability to scale up the value-chain will continue to plague its growth in smartphones, and it is unlikely to overtake Qualcomm, which recently signed huge deals with the large Chinese vendors, cementing the lead it has globally.”

Reliance Jio’s step inside the teeming market of smartphones will certainly force everyone to sit up and notice. The telecom operator will leverage all of its resources to put it in as many as hands it can. Perhaps, this will give rise to yet another trend where every OEM will pivot its focus to launching exceedingly affordable smartphones. But one thing is for sure — Reliance Jio is taking charge of every aspect of a smartphone process which begins right when the customer goes to buy on, and that will allow it to fabricate an indomitable customer base. For now, though, we can only wait.

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