Reliance Jio Archives - Counterpoint

BoM Analysis: JioPhone Next Costs $58 to Make, Lays Robust Foundation for 5G Shift

The JioPhone Next is one of the cheapest 4G smartphones available in the market.
The device will help Jio shift hundreds of millions of 2G and 3G users to 4G.
The device will also make it easier to shift 4G users to 5G once the coverage has reached a good threshold.

Reliance Jio, in partnership with Google, launched the JioPhone Next 4G Android smartphone on November 4 last year. With an aim to shift hundreds of millions of 2G and 3G users to 4G, the telecom operator has worked hard with suppliers to maintain a very disruptive bill of materials (BoM) at around $58. The smartphone is being manufactured at Reliance Jio’s Neolync facilities in Tirupati and Sriperumbudur in southern India. While Qualcomm, Samsung and AI start-up Syntiant have benefitted from the first generation of JioPhone’s 4G Android smartphone offering, Chinese suppliers have also won some important design slots in the multi-million seller. This can be seen in the following BoM and specification analysis:

Display

The JioPhone Next features a 5.45-inch LCD display with 720×1440 pixels resolution and 60Hz refresh rate. The LCD is illuminated by backlight and is relatively inexpensive, making it an ideal solution for budget smartphones. The display is manufactured by upstart Chinese supplier TXD. For the cover glass, Jio has opted for Corning Gorilla Glass 3, which has alkali-aluminosilicate that offers some resistance to scratches and protection from accidental drops. The display, along with the cover glass, takes ~21% share of the BoM cost.

Storage and memory

When it comes to low-end budget smartphones’ memory, most brands opt to use an eMMC (embedded multimedia card) storage. However, Jio has opted to go for an eMCP (embedded multi-chip package) solution due to space and power constraints on the PCB. An eMCP offers a smaller footprint compared to an eMMC. Sitting between eMMC and UFS (universal file storage) solutions, an eMCP storage combines NAND and DRAM to minimize latency and cut down on power consumption. 2GB of single-channel LPDDR3 SDRAM running at 672 MHz and 32GB of eMMC 5.1 flash is manufactured by Samsung and accounts for ~22% of the BoM cost.

Processor

The JioPhone Next is powered by Qualcomm’s QM215 SoC produced on a 28nm process node. The QM215 is a toned-down variant of the Snapdragon 425. This chipset is specifically designed to work on ultra-low-cost Android Go phones. The QM215 packs four ARM Cortex-A53 cores clocked at 1.3 GHz, which aim to increase the CPU performance by 50% compared to the earlier Qualcomm 2-series platform. The QM215 also packs in a third-generation Adreno 308 GPU clocked at 500 MHz, which has 24 ALUs (arithmetic logical units) that can perform 27 Giga-floating-point operations per second [GFLOPs FP32 – (single precision)].

Neural Processing Unit (NPU)

The smartphone also packs in a special speech recognition NPU from Syntiant. This NPU – NDP101 – is manufactured on a 40nm ULP (ultra-low power) process node featuring a single Core Arm Cortex-M0 CPU coupled with 112KB of SRAM that is capable of running deep learning algorithms efficiently for all the offloads from CPU and in ultra-low power consumption use cases as well.

The NPU supports an always-on listening feature, and wake-up-to-speech and voice commands, a key differentiator for the phone to bridge the “digital divide” by supporting multiple local languages not only for wake word but also translation. Reliance Jio’s partnership with Google has also brought along Pragati OS, an optimized solution of Android GO.

The processing section together contributes ~11% to the BoM cost.

Camera

The smartphone offers a single 13MP camera, with a 1/3″ sensor from SK Hynix, on the rear flanked by an LED flash. On the front, there is an 8MP camera with a 1/4″ sensor. Both camera modules contribute to ~9% of the BoM cost.

Sensors and connectivity

The JioPhone Next’s nominal sensor array includes accelerometer, proximity and ambient light sensors. Wireless connectivity choices include Wi-Fi 802.11 b/g/n, Bluetooth 4.1, and AGPS (indoor positioning). The single-band Wi-Fi and Bluetooth combo IC is powered by Qualcomm’s WCN3610.

In terms of connectivity, the Qualcomm 215 sports a Snapdragon X5 LTE Cat 4 modem with support for VoLTE, VoWiFi, EVS and Dual SIM Dial VoLTE, which are a key feature for emerging markets such as India. It is the first 2-series platform to support 802.11ac and Bluetooth 4.2. The SoC also supports dual camera ISPs. Sensors and connectivity together contributed around ~11% to the BoM cost.

Battery

The Jio smartphone packs a lithium polymer 3400mAh battery with a 13.09Wh rating. It is manufactured by Guangdong Fenghua NEW Energy. The battery is charged via a micro-USB port. The device features Qualcomm’s Quick Charging IC. The battery along with the power management ICs accounts for ~9% of the BoM cost.

Key takeaways

The JioPhone Next is a unique smartphone for its price segment, retailing at around $55-$80 (INR 4,400-INR 6,400) depending on the seasonal/regional/buyback offers, supported by a compact design. This makes it a compelling device for budget-oriented and feature phone users to cross the chasm.

Leveraging its scale, Jio has designed an optimum BoM for this smartphone despite supply chain constraints and increasing component prices. Jio has closely worked with Google to optimize the entire experience for the chosen hardware stack.

The device rounds up Jio’s strategy well — first, to use the JioPhone Next 4G to attract hundreds of millions of 2G feature phone users to its 4G network and second, to aim to deliver a sub-$100 to sub-$150 (INR 8,000-INR 12,000) affordable 5G smartphone once the coverage has reached a good threshold to attract the mass-market 4G smartphone users to its 5G network. This two-pronged strategy will be the key to Jio’s growth and extend its leadership to the 5G era as well. Further, at some point in 2024, Jio will also be compelled to launch an affordable 5G mmWave + Sub-6 GHz smartphone as the cost deltas between the two would have narrowed significantly from the BoM perspective.

For detailed component and pricing analyses, queries or to acquire this research, contact info@counterpointresearch.com

Is JioPhone Next the Most Affordable Smartphone?

On November 4, Jio launched the JioPhone Next, its much talked about and anticipated smartphone with Google. The device is being marketed as the most affordable smartphone. It comes at a down payment of INR 1,999, with the rest required to be paid via EMIs bundled with various plans.

Exhibit: JioPhone Next

Source: Jio

The retail price of the phone is INR 6,499 when paid in full. The device also comes with a customized version of Android Go – Pragati OS.

Jio’s Value Proposition, Target Consumers

India is still an underpenetrated smartphone market with over 300 million feature phone users, out of which over 60 million are JioPhone users, which represents an immediate opportunity.
Jio is also aiming to make India 2G free and connect the unconnected. Notably, Jio does not offer 2G services, and upgrading 2G users to 4G can increase its consumer base substantially.
Then there are existing smartphone users who are willing to upgrade. There are very few players in the entry-level market due to low margins and high distribution costs related to lower-tier cities, where most of the target customers live. However, Jio already has an extensive retail network which it can leverage to distribute the device.
Jio offers the JioPhone Next device on easy EMIs, and a consumer does not need a debit or credit card to access the same. Almost all OEMs are now offering EMIs but consumers need to have a debit or credit card for the same in most cases.
In terms of specs, Jio has prioritized certain aspects like camera, one of the most sought after features by consumers.
The phone also comes with Corning Gorilla Glass covering at a low price point. The repair cost here will be a big burden and Jio understands this.
Features like Voice First, Read Aloud and Translate Now help increase the ease of use and flatten the learning curve of smartphone usage. The phone also comes with the promise of future updates.
While the device overall has a feature set, which reduces the barriers to the adoption of smartphones, pricing remains the most important aspect for this segment.

Pricing Analysis

The biggest value proposition for Jio is the down payment of INR 1,999, which makes it the most affordable device. The consumers will also have to pay an INR-501 processing fee, while the remaining amount can be paid through EMIs which are bundled with a service plan. Jio has a device lock software, which restricts access to the device if the EMIs are not paid on time.

Exhibit: JioPhone Next Plans

Source: Jio

The low down payment is great for entry-level consumers, who cannot spend a large sum for a device initially but can pay small monthly amounts. However, notwithstanding the low down payment, the total cost of ownership for the JioPhone Next is very high.

The entry-level Always-on plan for Jio starts at INR 300 per month for 24 months and offers 5GB of data per month with 100 minutes of calling. Considering the data usage in India is over 14GB per month per user (Source: Ericsson Mobility Report, 2021), the 5GB per month mark is too low.

The next plan is the Large plan. It offers 1.5GB of data per day with unlimited voice calls at INR 450 per month for 24 months. When the device is bought at full price (INR 6,499), with a comparable prepaid plan of INR 199 for 28 days offering the same benefits as the Large plan of the JioPhone Next, the total cost of ownership for 24 months is reduced by 13%. The cost can be brought down further if a consumer chooses to use a refurbished device or a lower-cost device.

Also, if we subtract the data plan cost in the prepaid plan (INR 199) from the total cost of ownership of the JioPhone Next for 24 months with the Large plan, the device cost comes out to INR 7,681, compared to INR 6,499 when paying the full price. This is the same as charging interest on the EMIs for the device, which might not be a feasible value proposition in the segment Jio is targeting.

Conclusion

Jio has tried to launch a device with key features done right, which makes the transition from feature phone to smartphone easier. Overall, the JioPhone Next checks a lot of boxes except the most important one for this segment – pricing. Therefore, the overall value proposition falls short of being lucrative.

There were a lot of expectations from Jio for a lower-priced device, especially after how it disrupted the feature phone market with the JioPhone. The JioPhone Next definitely brings down the initial cost of device ownership and somewhat lowers the barriers of entry into the smartphone segment. But it also locks the users for 18 to 24 months in EMIs at a cost which is less lucrative than other available options. Unlike the JioPhone, the JioPhone Next fails to create its own market segment.

One of the reasons for more than expected pricing for the JioPhone Next is the ongoing component shortages, which are leading to price increases. OEMs that run on lower margins have no option but to pass on this added cost to consumers. Then there are other costs which have also increased, like transportation.

Jio is trying to address the difficult-to-capture lower-tier market at a scale that has not been seen before. In the process, it is building products, supply chain and mind share in the lower-tier segments. Therefore, consumers will think of Jio first when deciding to transition from feature phones to smartphones.

For a more detailed analysis on pricing, specs comparison with competitors and forecast for the JioPhone Next, subscribing clients can refer to the following report:

JioPhone Next Component Shortages Weigh Down on Pricing Strategy

India Smartphone Market Set for Record Shipments in 2021

India’s smartphone market will reach 173 million shipments in 2021.
More than 100 million smartphones will be shipped in H2 2021.
5G devices will make up 19% of the overall market.

India’s smartphone market shipments are set to hit a record high of 173 million units in 2021 at 14% YoY growth, according to Counterpoint Research’s India handset quarterly outlook. More than 100 million smartphones are expected to be shipped in H2 2021. The market has been experiencing strong consumer demand after the lifting of COVID-19 restrictions in June. The strong sales momentum will continue during the festive season from August to November.

The market has been experiencing a steady growth curve over the last five years to reach 158 million units in 2019. COVID-19 saw the market experiencing only a minor dip of 4% in 2020, showcasing its resilience as well as the emergence of smartphones in a more important role to cater to the pandemic-triggered need for digital communication and newer use cases. Even as the second COVID-19 wave hit the country in Q2 2021, the smartphone market bounced back faster than expected and registered its highest ever shipments in H1 2021.

As the number of COVID-19 cases remains under control and the vaccination program continues, the economy will bounce back and raise consumer confidence. The pent-up demand will also play a role, although its impact will be limited compared to last year as COVID-19 lockdowns were shorter this time around. The biggest factor pushing the market could be the launch of Reliance Jio’s low-cost Android phone JioPhone Next in September, which will enable migration of feature phone users to smartphones.

JioPhone Next to trigger feature phone-to-smartphone migration

India’s smartphone market opportunity is far bigger than what it seems to be. The country has a considerable installed base of 320 million feature phone users. Getting these feature phone users is the key to realizing the full potential of India’s smartphone opportunity. The JioPhone Next phone is expected to be priced below $75, a price point that hasn’t seen major activity in the last two years. If it works as expected, we might see the Indian market entering a period of hyper-growth.

5G smartphones to grow 8X in 2021

In 2020, 5G smartphones accounted for less than 3% of the market. But in 2021, the market for 5G devices will grow over eight times to reach 32 million units and make up 19% of the overall smartphone market. Intense competition among OEMs, availability of cheaper 5G chipsets and declining prices of 5G devices will lead to more 5G devices being pushed into the market. The average price of entry-level 5G devices has come down by 40% in the last 12 months. The cheapest phone with 5G now costs less than INR 15,000 (around $200). Preference for 5G devices is also high in India, with 21% of consumers claiming it is one of their top three priorities while purchasing their next phone.

Long-term outlook remains positive

India’s smartphone market is the second biggest market in the world after China. In 2020, the Indian market outperformed the North America, Latin America and Africa markets. Our outlook for India for the next five years remains positive, keeping in mind its 1.39-billion (and growing) population, upgrade of users from feature phone to smartphone, and future emergence of new use cases. The market is set to cross the 200-million mark in the next couple of years.

The comprehensive and in-depth Market Outlook is available for subscribing clients. Feel free to contact us at press(at)counterpointresearch.com for questions regarding our latest research and insights.

JioPhone Next: Google, Reliance Jio Eye the 'Next 500 Million' Smartphone Users

Reliance Industries (RIL) held its 44th annual general meeting (AGM) on June 24, 2021, where Chairman Mukesh Ambani updated the shareholders and media on the company’s progress and its future plans. RIL’s telecom arm Reliance Jio has already disrupted the sector by democratizing 4G voice and data offerings, which are the cheapest across the globe. The launch of JioPhone in 2017 at an “effectively free” price proved successful in helping unconnected users experience internet for the first time. After selling over 110 million JioPhones, Jio has now announced the JioPhone Next 4G smartphone.

The JioPhone Next is a result of the strategic partnership between Google and Reliance Jio that was announced at the 43rd AGM last year. Google has invested $4.5 billion for a 7.7% stake in Jio Platforms. The partnership aims to democratize smartphones to offer the most affordable Android smartphone with optimized OS and Jio experiences.

Source: Reliance Jio

JioPhone Next Designed for the Next Half Billion

While Jio did not reveal the specifications and pricing of the JioPhone Next, it did reveal that the smartphone will be available starting September 10. Jio also revealed that the smartphone runs on an optimized version of Android, with support for latest Android software and security updates. Ambani also highlighted that besides being ultra-affordable, the phone will include some cutting-edge features, such as:

A voice assistant to check the latest weather updates, prepaid balance on My Jio, and cricket scores. It will also play music on JioSaavn.
Translation of on-screen text into the user’s language and read-aloud features across the OS – web pages, apps, messages, and more.
Smart camera with HDR and low-light night modes, and built-in Snapchat lens filters for selfies.
Google Play Store for accessing apps and games, along with Google Play Protect built in for security.

The cheapest Android smartphone, Itel A23, sold by Reliance Jio is priced at INR 3,799 (around $51). If Jio and Google plan to subsidize the JioPhone Next, it could be available for well under $50, making it a killer deal. But we will have to wait till Jio officially announces the pricing in the next few months.

Opportunity for Reliance Jio’s Ultra-affordable 4G Smartphone

Reliance Jio now has over 425 million subscribers and is the first telecom operator from a country outside China to achieve this milestone. Jio looks to accelerate its growth by adding millions of more users in coming years, considering India is still one of the most under-penetrated smartphone markets in the world.

India’s population stands close to 1.39 billion, which has around 850 million unique mobile phone users at 61% mobile phone penetration. This leaves around 540 million of unconnected users who do not own a mobile phone yet. This unconnected segment mainly includes children, elderly people, and the ones below the poverty line.

According to our estimates, out of the 850 million unique mobile phone users, nearly 530 million are smartphone users, whereas roughly 320 million are feature phone users. With JioPhone Next, Reliance Jio is staring at a potential 520 million users. These include around 150 million unconnected, 50 million second hand/older used smartphone users due for upgrade and the 320 million feature phone users (including 4G Jio Phone smart feature phone users).

The 60-65 million active 4G Jio Phone (smart feature phone) users are probably the lowest hanging opportunity for Jio to upgrade them to Jio Next and boost ARPU and services usage. Simultaneously, the 2G feature phone users from Airtel and Vodafone Idea will be an important segment to target aggressively with this new ultra-affordable smartphone from Jio.

Jio Needs to Broaden Value Proposition for Jio Phone Next

In the new normal of work and learn from home, a smartphone holds more importance in a mobile-first country like India. Reliance Jio will look to first attract millions of feature phone users to its 4G network via the JioPhone Next and then some portion of the next half a billion population which is yet to buy its first mobile phone. Further, the COVID-19 pandemic is likely to have disproportionately impacted the livelihood of people at the bottom of the pyramid and Jio will need to present a very attractive value proposition to help these potential 4G smartphone users “cross the chasm”.

When Jio introduced the JioPhone in 2017, it was priced at INR 1,500, roughly $20. This acted more as a refundable security deposit, where after completing three years of usage, users could return the JioPhone and get a refund of INR 1,500. Considering this three-year contract expiry is nearing for most users, offering attractive upgrade deals would be a good way to ensure users remain “locked in” the Reliance Jio network and ecosystem.

Further, we could expect a “direct subsidy” as well as a “reverse subsidy” from Google and Jio respectively to make the device more affordable and price points closer to the earlier Jio Phone. EMIs, buybacks and cashback offers should also help broaden the value proposition.

Overall, Google and Jio’s partnership for JioPhone Next should help both companies to reach more users. For Google, it is a way to attract millions of users to the Android ecosystem and boost its existing global base of 3.1 billion users closer to 4 billion users in the near- to mid-term. But the real test will be to see the kind of Android experience this smartphone can offer at much lower price points. Google had earlier failed with its Android Go and Android One programs but with Jio it could be different as the suite of services and optimization actually is designed to bridge the digital divide. If this works, the next goal would be to scale this offering across other under-penetrated emerging markets.

Reliance Jio: World's First 'Super Operator'?

In the world’s second largest mobile market, Reliance Jio, India’s leading Communication Service Provider (CSP) or mobile operator, has taken the entire global ICT industry by storm with its vision and the most successful “serial” fund-raising over the last eight weeks. Reliance Group Chairman Mukesh Ambani (world’s sixth richest man with a net worth of $72 billion), with the launch of greenfield 4G network Jio in 2016, changed the entire competitive and technology landscape in India, amassing close to 400 million 4G subscriptions.

India went from 14 operators down to 4, with two out of the remaining four already on a life support and a third one reeling under debt, instantly offering Reliance Jio a monopoly position. A monopoly position married with serious money muscle and a clairvoyant vision to build a digital platform to empower and democratize technology in a country of 1.3 billion people, making it the most attractive company for any investor or stakeholder to partner with. It is called Jio Platforms.

Jio Platforms Needed Strategic Partnerships to Cross the Chasm

Jio, while amassing a healthy base of 4G subscribers consuming almost 13GB per month, has been still generating an ARPU of less than $2 per user. But to create stickiness, it has also build a platform full of services spanning Content, Commerce, Cloud and Communication, the four key pillars of any consumer’s digital lives. Jio has also vertical ambitions of own-branded devices and in-house development of network and data center elements as it already generated to much scale and has a strong buying power against suppliers. Having said that, the deeper capability, reach, execution and adoption of some of these OTT apps and services has been behind as it competes with bigger rivals. This has also led to Jio going in for acquisitions and a partnership route over the last year or so to help it build, integrate and execute this vision for its 400 million subscribers, tens of millions of businesses, hundreds of millions of households and beyond. There have been significant gaps in its platform’s capabilities to help push digital platform services and applications over the chasm. Though the vision is still great but needed investments and partnerships with scale and tech know-how. The slider graphic at the end of the post highlights the breadth of Jio Platforms but the capability to execute and adopt has been low to moderate.

$20 Billion Investments in Jio Platforms in Eight Weeks

With the world reeling with the COVID-19 pandemic, the demand for operator services has shot up, offering the right moment for Jio to announce a series of investments cum partnerships from the biggest technology companies such as Facebook, Google, Intel and Qualcomm, and investors such as Silver Lake, KKR, Vista, Saudi Arabia’s PIF, General Atlantic and TPG, which it has been working on for several months. Reliance raised $20 billion in just eight weeks, selling close to 33% stake, as valuation of Jio Platforms climbed to $60 billion, giving it the best funding round ever for any technology company. With this money, Jio has cleared all its debts, which include more than $11 billion to build its 4G network. The end-result: Jio Platforms is now debt-free, well-funded, has a clear vision and the monopoly status to become a ‘Super Operator’.

‘Super Operator’

We believe Reliance Jio or Jio Platforms is transforming into a Super Operator which is no longer a dumb pipe. With a platform approach, it is laying a strong foundation to play a key role across the users’ digital lives and businesses’ digital transformation journeys. None of the operators we can think of globally promises to build, offer and control what Jio is capable of.

Jio’s strategic partnerships with key companies such as Facebook, Google and Microsoft, the three biggest tech giants, will help it drive Commerce, Communication and Cloud areas, respectively, where it had been weak in terms of capabilities, reach and adoption. Further, acquisitions such as Haptik (AI voice Assistants), Embibe (Education Content Platform), Reverie (Multiple Language Integration), Savvn (Music Streaming), Tesserect (AR/VR) and Radisys (Network Stack) bridge many capability gaps to foster in the upcoming 5G era.

With 5G around the corner, Jio can lay out a fully-controlled greenfield network to build the software stack via Radisys in fixed as well as wireless networks. It remains to be seen if there are any other big moves on the Radio Access Network (RAN) hardware side or it will depend on the long-term partner Samsung.

With Google, Jio aims to democratize 5G hardware with plans to offer the most affordable 5G Android smartphone in the market with the OS specially optimized for a low-cost 5G Jio smartphone. We estimate this to soft launch in Q4 2021 and proliferate through 2022 and 2023 with a target price point of sub-$100.

This is how the portfolio vs capability graphic looks with investments, partnerships and acquisitions to make the company a Super Operator. Though all eyes will be on Jio over the next five years on how it builds on its vision and helps generate great ROI for the investors and partners once it goes public and beyond the Indian shores.

For more details on what Reliance Jio announced, from its latest partnerships to new offerings from video conferencing to AR/VR headsets to e-commerce platform and more, follow the upcoming post here.

Deep Dive :: How will Facebook Recoup its US$5.7 Billion Investment in Reliance Jio?

My colleague Tarun eloquently summarized his perspective on how Facebook’s $5.7 billion investment in Reliance Jio platforms will help Facebook monetize Whatsapp. This can be the ‘eureka’ moment for the Indian digital commerce sector to offer a mobile platform and services to the businesses which are still not benefitting from intersection of mobile, software and internet.

This is one of the biggest deals in India’s telco history and second biggest for Facebook after its Whatsapp acquisition.

While it is quite straightforward how Reliance Jio, which has grown to become the top Indian operator, benefits from this deal. The mobile giant gets the dollars to reduce its debt & have access to Facebook’s technologies. However, the larger question here is what’s in it for Facebook? Even though it can be considered a long-term strategic bet, what will need to happen for Facebook to reap a healthy ROI on this huge $5.7 billion investment?

We see the opportunity for Facebook to recover at least 5x on its investment over the next few years. This deal is much more than Whatsapp-Jio digital commerce solutions. Not certain if this is what Mr. Zuckerberg had in mind, but certainly the expectation is a substantial return on this massive investment. For understanding it better, let’s deep-dive into the current capabilities of both of the tech giants and where there are synergies for deeper integration and who has the most to gain?

Ad Platform Integration into Jio Platforms: This is the biggest and only way to recoup big $$$. By targeting the Jio user base, Facebook will be receiving a revenue % cut as Jio, thus far, has failed to monetize its ~400M subscribers via advertising.
Digital Commerce: While Whatsapp is touted to be “the channel”, the real $$ will come from the % cut on the commerce transactions (margin and commissions) over the platform via millions of SMEs & users. Average transaction/SME for Facebook is the metric Facebook will be keeping an eye on.
Whatsapp: Big opportunity to white label Whatsapp for Business into a platform powering Jio’s properties and monetizing via customization for different SMEs to setup channels/ store (Shopify model) or consumption model for communication & commerce.
Social Graph: Obviously having access to close to half a billion subs (projected) will greatly enhance Facebook’s Social Graph, further attracting marketers & higher bid rates. The traditional Facebook advertising business will get a shot in the arm vs. Google and others.
Facebook Connectivity: The business model is not entirely known but Facebook’s aggression to rope in ISPs and influence open network architecture (potentially to its long-term access benefit) and the current positioning of bringing Internet to masses which indirectly expands its TAM of potential advertisers and audience. With Jio this should be part of Facebook’s long-term strategy.
Content: Jio TV has been the most successful of Jio’s digital properties. Facebook could see this as an opportunity to scale its content ambitions in the second largest market in the world (largest if you leave out China). Cross-selling gaming and video content to Jio’s growing user base would be lucrative. However, this is relatively tougher and has a high CAPEX vs. the above opportunities of monetization. We discussed this six years ago why Facebook should have gone aggressive with its content ambitions. Players such as Spotify and Netflix are leaders handsomely attracting ears and eyes and a greater share of digital life.

Privacy & Regulatory Hurdles Galore

Having said that, Facebook has multiple avenues to monetize this strategic investment but lot will depend also on how the government sees this (and potential competitors which will lobby hard against the deal). There will need to be high transparency on the data sharing agreements between the two giants. Further, the user data and platform cannot be misused for intrusive or targeted schemes similar to Facebook’s scandalous history, as the trust factor is fairly low. Thirdly, Indian government could be concerned about the amount of data access Facebook will have.

Future of Telcos

It is said that data is the new oil. I would argue data is the new “crude” and what companies like Jio or Facebook or Google do with this crude converting into Big information is going to shape the future business model in the telco space as everyone is looking to become an end-to-end internet player rather than a telco. I believe if this trend continues, in the next ten years, we could see e-commerce, content, cloud and social tech companies replacing traditional telcos to sell end-to-end services from communication to content to commerce to cloud to collaboration services.

More than a Billion Feature Phones to be Sold over Next Three Years

Globally, the feature phone segment is forecast to generate around US$16 billion cumulatively in wholesale hardware revenues over the next three years. India remains the largest market in terms of potential feature phone volumes followed by Bangladesh and Nigeria.

Seoul, Hong Kong, New Delhi, Beijing, London, Buenos Aires, San Diego

March 13^th, 2019

In contrast to the smartphone market, which contracted for the first time in 2018, the feature phone market has continued to grow over the last three years. Latest research from Counterpoint Research estimates that in 2019, a little more than 400 million feature phones will be sold globally. Further, feature phone shipments are expected to cross one billion units by 2021.

According to Peter Richardson, Research Director at Counterpoint Research, India and the Middle East Africa region will drive the growth of the global feature phone market by capturing nearly three-quarter of the market share in 2019. “India and the Middle East Africa region will see cumulative shipments of around 800 million feature phones out of more than one billion global feature phone shipments over the next three years. Globally, the feature phone segment is forecast to generate around US$16 billion cumulatively in wholesale hardware revenues over the next three years,” Peter says.

Exhibit 1: Cumulative Feature Phone Shipments Opportunity by Geography (Millions of Units)

While India remains the largest market in terms of feature phone volumes, it is closely followed by Bangladesh and Nigeria. In Africa, growth is led by brands like itel and TECNO.

Much of the growth of feature phones in India has been driven by the revival of the Nokia-branded features phones and the popularity of the Jio Phone, a smart feature phone which packs a chipset and an operating system that can support sophisticated smartphone-like features in a traditional feature phone form-factor. The Jio Phone uses KaiOS as the operating system. KaiOS has also been expanding its reach in Africa. At the recently held Mobile World Congress in Barcelona, KaiOS announced partnerships with African operator Orange to launch KaiOS-powered smart feature phones priced at US$20 across 16 countries in Africa and the Middle East.

There are several reasons why feature phones are the preferred mobile phone in many markets globally, despite the tremendous adoption of smartphones. An important factor is affordability. The bottom of the pyramid population across the world simply cannot afford a smartphone.

“There are more than three billion people across the world who live on an income of less than US$2.50 per day. This segment can neither afford a smartphone nor the data services demanded by the growing advancement in smartphone use-cases. Thus, a feature phone, coupled with basic mobile services has been the go-to offering for these users to communicate and connect. Most of these users are prevalent across Africa, parts of Asia and Latin America,” says Tarun Pathak, Associate Director at Counterpoint Research.

There is also a business case for network operators to push feature phones. In most markets, network operators want customers to upgrade from 2G/3G to 4G networks. “The problem is most of these users still cannot afford a 4G smartphone. Therefore, operators and the mobile industry players need to offer 4G VoLTE feature phones and move users to the more efficient 4G network,” says Pathak.

Counterpoint Research believes the rise of 4G capability in feature phones will be one of the key trends moving forward which will allow the feature phone segment to remain relatively resilient in the medium term.

Further, there are also several use cases that are driving the sales of feature phones. For example, industry segments like construction require rugged devices with technologies like PTT (Push-To-Talk) to cope with the hostile environment. Feature phones offer a viable alternative for this segment.

Similarly, there is also a need for longer battery life. Varun Mishra, Research Analyst at Counterpoint Research explains, “The emerging markets of India and Nigeria have the greatest number of people without access to electricity. However, the phone remains an important part of people’s lives in these regions as well. Amid the dearth of electricity, in some cases, the user is dependent on public charging stations (shops giving facilities to charge phones in return for a payment). Long battery life becomes crucial in such situations.”

Counterpoint Research believes that markets in Africa, especially Kenya, Ethiopia, and Tanzania have the highest potential for feature phones. In terms of the total addressable market opportunity, India, Bangladesh, Nigeria, Pakistan, and South Africa remain the key markets.

Background:

Counterpoint Technology Market Research is a global research firm specializing in Technology products in the TMT industry. It services major technology firms and financial firms with a mix of monthly reports, customized projects and detailed analysis of the mobile and technology markets. Its key analysts are experts in the industry with an average tenure of 13 years in high-tech industries.

Analyst Contacts:

Peter Richardson
peter@counterpointresearch.com

Tarun Pathak
+91 997-121-3665
tarun@counterpointresearch.com

Varun Mishra
+91 991-502-0142
varun@counterpointresearch.com

Follow Counterpoint Research

Top

Insights Tag： Reliance Jio

BoM Analysis: JioPhone Next Costs $58 to Make, Lays Robust Foundation for 5G Shift

Related Posts

Is JioPhone Next the Most Affordable Smartphone?

Jio’s Value Proposition, Target Consumers

Pricing Analysis

Conclusion