India: Trusting in $41 tablet

IndiaICT

Economic News

21 Nov 2012
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Over the past decade of economic growth, India has worked hard to position itself as a pioneer of low-cost manufacturing. Where once the whole world marvelled at the Tata Nano, the world’s cheapest car, the Indian government is hoping that it will once again attract international attention with the world’s cheapest tablet computer, the Aakash-2.

The product, launched on November 11, the nation’s Education Day, will go on sale in late November at a regular price of Rp2263 ($41) and Rp1130 ($21) for students. India’s National Mission for Education runs the Aakash project, and the UK’s Datawind has been awarded the contract to produce the tablet, which will be manufactured in India by VMC Systems. It was announced in October that the government wants to buy 5.86m devices at a cost of Rp13bn ($240.28m).

There are some reservations in terms of how successful the new product will be. Datawind’s first product, Aakash, which was marketed commercially as UbiSlate, was largely a flop. In addition to order delays, there were a number of complaints that seemed to doom the product, including a low battery life and a slow processing speed. The government hopes the new product, which uses Google’s Android operating system, will have more success.

Not everyone is convinced that this will be the case, however. Keith Liu, the business development director of the mobile digital home division for Asia and Latin America at Lenovo, told The Economic Times, “In my personal view, it is very challenging to produce a tablet at that price, which can carry a great customer experience… As a person who studies the tablet market closely, I can say that the bill of materials will be high if you want to produce a quality tablet. At that (proposed) price, you may have to make the tablet limited in certain ways and functions.”

Nonetheless, the government remains bullish. Kapil Sibal, the minister of information and communications technology (ICT), has even talked about marketing the product internationally. On a trip to Turkmenistan in September, Sibal talked up the potential of a joint venture with a Turkmen manufacturing unit.

A successful launch of the Aakash-2 would certainly have great potential to alter the tablet market. According to The Economic Times, the world tablet market should exceed 45m tablets this year, while the Indian market is expected to reach 1.5m tablets. A successful low-cost tablet could dramatically alter these figures.

However, the greatest impact of the Aakash project is likely to be on the local ICT market. The successful uptake of this product could spawn opportunities for a host of companies, ranging from content providers to internet service companies. One of the biggest challenges for the country remains infrastructure rollout and the cost of internet service provision. Indeed, the proliferation of cheap hardware will have little resonance without widespread connectivity at affordable prices.

According to the Internet and Mobile Association of India, there are 150m internet users in the country, which is low compared to the nation’s 1.2bn population. As such, there is significant room for growth in the market. Much of this is likely to come from the rapidly growing mobile segment. Many companies and customers are progressing directly to next-generation technologies, such as smartphones and tablets.

According to StatCounter, a firm that provides web traffic analysis, mobile internet usage overtook fixed-line services in India for the first time in August. In that month, mobile internet accounted for 51.63% of total internet usage, suggesting a surge in smartphone and tablet computer users.

This trend is only likely to continue, but both companies and consumers face cost impediments. According to a recent study by The Economic Times, the auction prices proposed by the Telecom Regulatory Authority of India for a range of services are disproportionately expensive when the average revenue per user for operators is taken into account. According to the study, the proposed price of the 700-MHz band, which will be used for 4G services, is expected to cost $38.88 per–unit, per-inhabitant, a figure 32 times higher than in the US.

This did not deter Bharti Airtel from rolling out India’s first 4G service in Kolkata in April 2012. However, prices remain an issue, with the slow uptake of services leading the company to drop 4G dongle prices by almost 50% to $89.72 in July.

This suggests that while the Indian market continues to develop, the success of ventures such as Bharti’s 4G or the Aakash-2 will be dependent on price competitiveness in the market. Challenges remain in this regard, but as volumes and competition increase, the maturity and viability of the market should develop.

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