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The Financial Times recently announced that Google is restarting its Android One project in the Indian smartphone market. In September 2014, the Android One launched in India at a price of about $100, but it failed to gain any footing in the extremely cost-conscious Indian market. While global smartphone prices are decreasing (averaging $314 as of 2014, and estimated to drop to $267 in 2018), Indian consumers might have set the new low. Indian consumers tend to buy smartphones priced between 2000 and 3000 Indian rupees (US$31-$47), and tech companies are preparing to cater to the large Indian market.

Rajan Anandan, managing director of Google in Southeast Asia and India, acknowledged the difficulty of making Android One successful in India. “It is like any company when you try to launch a new initiative—we had a few hiccups,” he said. The Android One phone is also available in other emerging markets such as Bangladesh, Indonesia, and Myanmar, bringing smartphones to those who would not be able to afford it otherwise.

The Indian market presents a unique challenge to tech companies. According to CNBC, while Indians are very active on social media such as Facebook and Twitter (ranking as the second and third largest market for each company respectively), digital advertising revenue is limited in the Indian market. Video sites such as YouTube and apps such as Google Maps, which require fast connections, are hampered by India’s spotty Internet infrastructure and slow bandwidth. However, smartphone usage is surging and could even overtake the United States by 2017.

Google also has to fend off competitors such as Apple and Microsoft; the latter announced aggressively marketing their Lumia 430 smartphone in India and other emerging markets to prevent being completely overshadowed by both Apple and Android. “We need to continue to push price points even lower,” said Chris Weber, Microsoft’s corporate vice president of mobile device sales, in an interview with VentureBeat at Barcelona Mobile World Congress. “But it’s not so we can say we have the lowest prices. I want to position us as the best value. These are still no-compromise devices.” The Lumia 430, priced at only $70, comes with Skype, 30 gigabytes of free OneDrive cloud storage, and dual SIM capabilities.

Chinese smartphone manufacturers are also competing for the wallets of Indian consumers. Xiaomi, Lenovo, Huawei and Gionee have doubled their combined market share in India. “etailers (electronic retailers) have opened additional avenues for growth for many vendors in India, who would have otherwise struggled to get a hold in the complex distribution network,” said IDC India Mobile Phone Team Research Manager Kiran Kumar.

Researchers also cited the slowdown in the Chinese smartphone market as India’s gain. “As China started to slow down, most vendors from the country have targeted India as the next big growth market for smartphones,” said IDC Research Manager Kiranjeet Kaur of the Asia/Pacific Mobile Phone Team. E-commerce companies such as Amazon, Flipkart and Snapdeal (the latter two are local e-commerce websites) have been targeting Indian consumers with flash sales on low-end and even mid-range smartphones. “They have also focused on bringing more 4G phones at an affordable $100-150 price points, which is left unattended by Indian and global vendors,” Kaur continued.

The competition in the Indian smartphone market is fierce—Samsung leads the way in market share at just under a quarter of Indian smartphone users (23 percent). Local companies such as Micromax (17 percent), Intex (11 percent) and Lava (7 percent) present a significant challenge, while Lenovo (6 percent) was the only Chinese manufacturer in the top five. Apple has struggled in India (2 percent), but the company has recorded growth in the country nonetheless.

Indian Prime Minister Narendra Modi’s “Make in India” initiative is vital to low smartphone prices in India, as the initiative seeks to push India as a manufacturing hub. Modi’s initiative allows for 100 percent foreign direct investment (FDI) in the electronics sector, allowing any global smartphone manufacturer to establish a hold in the competitive Indian market, while providing Indians with jobs so they can buy the latest smartphones.

While Android One may be ambitious in establishing low smartphone prices in India, the amount of competition that could come around as a result of government policy and the market’s explosion of smartphone usage could make smartphone prices lower than ever.

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