Google Android One: Tighter Control & Mass-ive Scaling

The day has finally arrived as Google formally launches devices under its much talked about Android One program. India’s Micromax, Karbonn and Spice Mobile are the marquee partners for the Android One program as they together launch the new Android One smartphones running latest version of stock Android with retail price range around US$100

What does Android One mean for the mobile industry?

For Google:

  • Google has been losing control over the Google ecosystem since the proliferation of Android based devices especially in high-volume emerging markets especially China
  • Most of the OEMs have tried to fork the Android and replace the key GMS (Google Mobile Services) elements piece by piece with their own applications and services
  • This forking started at the UI level going down to replacing almost complete GMS cloud with their own cloud. e.g from Samsung Galaxy to Xiaomi MI UI to Amazon Fire OS to Microsoft ‘ Nokia X
  • Remember, Google is a horizontal player with a business model primarily aligned at amassing volume and scale for its Android platform and more so GMS cloud to maintain stickiness, eyeballs and fingers on its platform. This is to attract more and more advertisers to its platform and learn more and more about its users by spreading GMS deep into users’ lives
  • Secondly, Android One program also tackles a big glaring issue of Android fragmentation with ability to deliver latest Android version at lower price points leveraging turnkey solutions with improved time-to-market
  • Thirdly, the majority of the smartphone growth is going to come from emerging markets and that too in sub-$150 retail segment. All the bottom of the pyramid action is going to be in the emerging markets
  • After China and USA, India is the third largest smartphone market in the world and Google won’t like to leave such a huge market in control of brands looking to use a custom forked Android OS as happening in China
  • As a result, Google would like to regain back a greater deal of control over its Android platform and more so ensure that the latest GMS cloud reaches masses, Android One is the answer
  • For Google, this is therefore an important long-term play which it will replicate in many other markets bringing the latest Google cloud experiences bundled with affordable hardware to the masses
  • Watch out for other local kings in markets such as Indonesia (Mito, Evercoss), Vietnam (FPT), Thailand (iMobile), Nigeria (Tecno) and many more in coming years
  • However, Google will have to work hard on integrating localized content, language support, life tools and services natively to help this program becoming a hit in coming years

For OEMs

  • Partnering with local kings is the right strategy. Players such as Micromax, Karbonn and others have grown on the mobile phone experience curve and have invested in brand, distribution and products to take it to the next level
  • This also means Google is working closely with these fast-growing vendors thus offering marketing muscle, increasing these partners’ brand equity and beefing up portfolio with newer “Nexus” style  Android One devices to differentiate from hundred other long tail brands in the market right now
  • While within the three local kings (Micromax, Karbonn, Spice)  selected for the India launch of Android One program the differentiation would be minimal from software perspective but hardware and price-level differentiation will be the factors these three will compete on with each other
  • It will be interesting to see how Google works with local vendors to natively integrate localized Google cloud into the devices to keep the custom AOSP variations at bay
  • Android One program is a great news for consumers as it allows them to enjoy latest Google platform version and cloud services at affordable price points and sooner rather than later and could contribute to higher Android customer satisfaction score
  • For likes of Samsung, LG, Huawei and others this is a bad news as Google is helping their competitors with latest platform development on low-cost hardware to capture a greater share of high-volume entry- to mid-tier smartphones. the implications will be loss in marketshare
  • The launch price points could be slightly above $100 but with a month or so it should settle around under $100. We will see a broader portfolio of price range as the program expands in future

For Supply Chain

  • This is great news for component vendors to scale their components in a better and faster way
  • We estimate demand for Android One based smartphones is going to be relatively high and would help turnover specific component inventory quicker than it would for devices running older Android
  • However, with turnkey solution and constant pressure for OEMs to deliver a low-cost handset would also keep the component vendors on toes to supply latest components at attractive price-points
  • Android One also means a great opportunity for local content providers and companies producing software, apps and services for local consumer tastes and needs to partner with Google and integrate deep into the Google platform

In summary, Google’s Android One program is a great strategy by Google to regain control over the Android platform and push the Google cloud services to the bottom of the pyramid. For Google this is a massive scale play and for OEM partners this is a way to get in bed with Google and raise their brand equity. For Consumers, it is to get Nexus like experience at highly affordable price points.We estimate Google Android One based phones to reach roughly 2 million units this year and roughly 16 million units next year as the program expands to other markets