(Bloomberg) – Billionaire Mukesh Ambani’s plan to hit the Indian market with a locally-assembled Google smartphone is facing headwinds, with supply chain disruptions and rising component prices suppressing production volumes, people familiar with the matter said.
Ambani’s Reliance Industries Ltd. had originally targeted hundreds of millions in sales for the inexpensive device in its early years, but is now targeting a small fraction of that when it launches, people said. The co-branded phone is slated to be unveiled at the conglomerate’s shareholder meeting on June 24, followed by an official debut as early as August or September, people said, asking not to be named as the plan is not public.
The tycoon wants to redesign the fastest growing smartphone market in the world in a similar way to how he does cell phone services – with aggressive prices. However, any delay in efforts would be a significant setback for Reliance and its Indian manufacturing partners. Chinese rivals like Xiaomi Corp., Oppo and OnePlus have established their brands and set up local manufacturing facilities as they target the same target group of consumers upgrading from simple 2G devices.
Reliance and Google engineers at Alphabet Inc. have teamed up to tailor a device for the technology-hungry but price-sensitive country whose internet users are expected to exceed 900 million by 2025. They have a hardware design and a version of the. develops the Android operating system which, according to people, can provide a high-end experience without expensive materials. However, sourcing the components has proven to be a hurdle after the coronavirus pandemic increased demand for electronics worldwide and created bottlenecks.
During the process, cultural differences have also surfaced at Reliance and Google, with the Indian company relying on a top-down operating model while the US engineers are more self-determined, people said. That has resulted in last-minute decisions and calls in the middle of the night, contrary to Google’s usual predilection for planning things months in advance.
Google and Reliance officials did not respond to emails asking for comments.
A meeting between Reliance and Google teams just last week, just a fortnight before the planned Ambani reveal, didn’t bring any definitive details on the hardware specs, people said. Important parts like displays and chipsets are scarce and procurement takes longer than usual, which makes decisions about hardware selection uncertain.
The time to source such materials has doubled from the previous 30 to 45 days to around 60 to 75 days as China, which manufactures and supplies components for almost every smartphone in the world, is running out, people said.
The price of a microprocessor built into a smartphone battery charger has almost doubled from 5 cents to 9 cents in a matter of months, according to a person who works for an Indian contract manufacturer to assemble the Reliance Google device. Display prices have skyrocketed 40% and getting a chipset bulk allocation is proving extremely difficult, the person said.
Delivery times for so-called SMD machines, which can assemble thousands of smartphone microcomponents per hour, have reached six months, compared with 45 to 60 days in January, several people said.
Rising shipping costs have contributed to the challenges. A 20-foot container from China to India that cost $ 800 before the pandemic went up to $ 5,000 and is now $ 3,600, according to a person from another Indian contract manufacturer.
Reliance and Google started the project after the companies entered into a broad alliance last July. For about nine months, Google engineers in Silicon Valley have been working on the challenge of offering a first-class software experience at a previously unprecedented price. The team tries to make the operating system more responsive and more resistant to crashes with more economical hardware. This is a well-known effort for the company, which has taken several previous initiatives to make Android more accessible to simpler devices, such as its Android One push.
Ambani has drawn more than $ 20 billion in investments from US giants like Facebook Inc., Google, and Qualcomm Inc. to bolster its technology footprint. In addition to the new smartphone, this month he will give an update on the cooperation with Qualcomm and Facebook’s WhatsApp on 5G and e-commerce.