Xiaomi today announced Mi A1 at a global launch event in New Delhi. One of the major highlight of the launch was Xiaomi’s partnership with Google and launching the device under its Android One program. While Android One makes a comeback after a couple of years in India after its less than successful maiden launch. However, this time one can expect Google applying its learnings from its previous bet. Quick summary below:

• Within the past one year we have seen three different strategies from Google: Google Pixel, Android Go and Android One comeback. While all three strategies looks different on paper the underlying objective for Google is similar which is to fix Android fragmentation
• Fixing fragmentation will help Google to gain direct control of the Android user base and drive more stickiness with timely support for the latest features especially when software differentiation is likely to gain more popularity than hardware differentiation for smartphones in short to medium term
• Moreover, if we dissect the Android Go, Android One and Google Pixel it gives a broader set of understanding on how Google aims to target audiences based on price segments. So it will be Android Go (Entry level), Android One (Mid segment) and Google Pixel (Premium segment) and may be also OEM-level differentiation: Android Go (Local Kings), Android One ( Global and Chinese brands) & Google Pixel (self-branded)
• Coming back to Xiaomi Mi A1, which was launched on September 5th at INR 14,999 (~US$230). It marks the beginning of refreshed Android One program. With it Google aims to target users upgrading in the mid-range segment, especially in emerging markets where it is growing fast. In India, $150-$300 is also the fastest growing segment and the same holds true for other countries in South East Asia like Vietnam, Thailand and others.
• For Xiaomi, it also fills the gap in the mid segment and coming at the right time when it is expanding in offline sales channels. Moreover, with Xiaomi’s reach, now to over 40 countries, MiA1 can give quick scale for Google across these markets. Earlier Google managed to reach only 20 countries within a year of its Android One program launch by partnering with 18+ OEMs. Hence its a win-win for both Xiaomi and Google.

Exhibit 1: Global Android One Smartphone Sales – Market Share by OEMs – CY 2014-2015

• Cumulatively the first iteration of Android One from all the 18+OEMs managed to sell only a few million devices in three years.
• Given its current momentum, Xiaomi can easily surpass the entire first iteration of Android One sales.
• Another synergy comes from the fact that Google has been always looking for a partner which also allocates equal resources and deep interest in the Android One device
• One of the key reasons for the failure of previous entry level Android One was a lack of interest from OEMs to push Android One. Their own devices at that time were better in terms of specs and margin. Moreover, OEMs didn’t want to be dictated to over hardware specs from a third party. In the new MiA1, Google has made it clear that it will have a say only on software experience, while on hardware it will leave it up to the OEMs.
• An OEM like Xiaomi is an ideal partner for Google thanks to its lean portfolio and aggressive specs at affordable prices.
• Additionally, having stock Android as a purchase criteria is unlikely to be a priority as far as the consumer is concerned, but it can be good as far as the post purchase experience is concerned.
• What consumers do care about is hardware specs and on that score, the MiA1 doesn’t disappoint: with cameras being high profile currently, the dual 12MP wide- angle and telephoto lenses should be a great purchase driver.
• On a broader note, post Xiaomi’s announcement, Google has given a signal that it is open for partnerships with more OEMs in the mid segment. This can be exciting for OEMs which are looking to differentiate in mid segment and might end up getting marketing support from Google. OEMs also should also factor in Google’s strength in new categories especially in AI and mixed reality. While these are not yet part of Android One, they do indicate a partnership with Google will help them understand the shifting trends and potentially enable them to beenfit from earlier implementation than rivals that are not aligned so closely to Google.

To summarize, we believe that Google will look to OEMs that have great reach and flexibility as a way to drive up its installed base of stock Android devices. The partnership with Xiaomi has opened the door for more such partnerships. Now it is up to Google on how to sell its strategy to OEMs. We don’t expect Google to take its Pixel initiative to the mid-range – it will likely prefer to remain in the premium segment. Instead we expect further investment in creating strong partnerships with key players in the mid-range.