Microsoft (NASDAQ: MSFT), Mozilla, the Tizen Association and others are moving to lower-cost hardware in an effort to gain share in emerging markets. However, Google's (NASDAQ: GOOG) Android One software and hardware reference design program could undercut those efforts by enhancing the Android experience on cheap devices in the developing world.
The new Android One program could help Android capture a large chunk of the next billion smartphone users. With developed markets reaching higher and higher smartphone penetration rates, most research firms have pointed to China, India, Africa and smaller countries in the Asia Pacific region as growth engines for the smartphone market in the years ahead. Indeed, IDC recently reported that smartphone sales in India shot up 186 percent in growth in just the past year--with 78 percent of sales coming from devices priced below $200. And China will surpass the United States as the world's largest handset market by revenue in 2014, not just in volumes, according to a recent report from research firm Strategy Analytics.
Android's competitors are trying to take advantage of those trends by pushing down hardware costs. Microsoft's Windows Phone hardware partners are expected produce devices this year that cost less than $200, according to a Microsoft executive, a shift that could lead to an increase in market share for the platform.
Microsoft is working with Qualcomm (NASDAQ:QCOM) to bring its lower-end smartphone chips to Windows Phone devices this year, and is also allowing its partners to use Qualcomm reference design chips, which could reduce device costs. Further, new Windows Phone OEM and ODM partners include Foxconn, Gionee, Lava, Lenovo, Longcheer, JSR, Karbonn, Micromax, Prestigio and ZTE. Many of those companies have strong positions in emerging markets like China and India where devices are cheaper than in Western markets.
Meanwhile, Indian hardware firms Intex and Spice are going to build $25 phones running Mozilla's Firefox OS using a processor from Chinese company Spreadtrum, and are expected to begin selling them in the next few months.
The Android One program could hamper those efforts because it is designed to provide a software and hardware reference design to smartphone makers that Google said will help lower the cost of developing and making Android phones. Google will unveil Android One hardware made by Micromax, Karbonn and Spice in India later this year. Google said that Micromax, for example, can build a 4.5-inch Android device for under $100. Android One phones likely will be available for under $200.
Google clearly understands the importance of the emerging market. Last year the company said its Android 4.4 KitKat platform was designed in part to work on low-cost phones. "As we get on our journey to reach the next billion people, we want to do it on the latest version of Android," Google's Sundar Pichai said last year.
However, as The Verge notes, Android One takes that approach a step further by ensuring that hardware makers can easily make Android devices because Google is figuring out the material costs. Google calls Android One "a comprehensive solution to address the mobile computing needs of those in emerging markets."
Further, Google is also making sure Android One phones will run stock Android, get automatic updates and access Google's Play Store for apps and media content. The overall effect is to make the hardware and software experience on devices in emerging markets more on par with higher-end devices in the developed world and ensure that users can get updates easily.
Android controlled 81.1 percent of the global smartphone market in the first quarter of 2014, according to research firm IDC, compared to Windows Phone's 2.7 percent. However, research firm CCS Insight recently estimated that the percentage of Android devices that do not run Google's services could increase to 30 percent in 2015, which could undercut Google's revenue from advertising and content sales, especially in emerging markets.
- see this The Verge article
Google exec: There will be a new Nexus phone this fall with release of Android L
As Google sheds hardware ambitions, its software strategy gets clearer
Google shows off redesigned Android 'L' as well as One, Wear, Auto, Fit and TV initiatives
Analysts: 30% of Android phones in 2015 won't access Google services
Microsoft exec indicates Windows Phones costing $200 and below are coming