The real reason Google’s introducing Android One

Puneet Sikka - Author
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Jun. 27 2014, Published 4:21 p.m. ET

Google launches Android One to target emerging markets for smartphones

In the previous part of this series, we discussed a number of new Android-based software products that Google (GOOGL) launched during the I/O developer conference held in San Francisco on Wednesday. One of the products Google launched, keeping emerging markets in mind, was Android One. With Android One, Google is aiming to capture the next billion people who don’t have smartphones—especially in emerging markets. Google is planning to partner with a few smartphone vendors to introduce sub-$100 smartphones in India based on Android One.

Affordability plays an important role in emerging markets

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Emerging markets are price-sensitive, and the affordability factor plays a very important role there. According to a report from IDC and as the chart above shows, in 2013, about 745 million sub-$100 feature phones sold worldwide, and India sold more than 200 million phones, followed by the Middle East and Africa plus Asia Pacific. That’s why cheaper smartphone players like Nokia (NOK), BlackBerry (BBRY), and Lenovo (LNVGY) have seen more success in these markets. Even Apple (AAPL), which is otherwise a premium player, had to resort to some sort of price cuts in emerging markets, such as launching the cheaper iPhone 5C last year and reducing the prices of older models such as the iPhone 4S.

Future smartphone market growth will come from emerging markets like India

Google has taken the right step in planning to collaborate with cheaper smartphone vendors to target emerging markets like India. According to the same IDC report, “Recently the surge in growth has started to slow as smartphones already account for over 80% of China’s total phone sales. The next half billion new smartphone customers will increasingly come mainly from poorer emerging markets, notably India and in Africa. India will be key to future smartphone growth as it represents more than a quarter of the global feature phone market. Growth in the India market doesn’t rely on high-end devices like the iPhone, but in low-cost Android phones. Nearly half of the smartphones shipped in India in 2013 cost less than US$120.”

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