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Can Mukesh Ambani’s $50 phone survive world’s worst chip crisis

Jio will have to put efforts into managing the supply of components of its already delayed JioPhone Next smartphone, analysts said, adding components shortage and rising cost will remain a challenge for the company from a subsidy perspective. They however added that the delay will give Jio some time to rectify the glitches identified during different levels of testing.

“If we analyse the impact of component shortage by price tier, the entry level price tier is the most impacted. The price of certain components have increased by almost 20% but it’s not just about the price the lead time to procure these components have also increased significantly like from 8 weeks earlier to almost 16 to 20 weeks in for some of the components,” Tarun Pathak, associate director at Counterpoint Research told ET.

Pathak added that for Jio it will now be all about managing the supply. “This could also mean the first Jiophone Next version could have limited shelf-life before it starts focusing on new SKUs for the next year as components availability and price is likely to remain challenging for next 6-8 months. Also this impacts the pricing strategy of JioPhone Next on how much needs to be absorbed from subsidy point of view.”

Reliance Jio has officially delayed the launch of its affordable smartphone, JioPhone Next, which was developed in partnership with Google, owing to the ongoing semiconductor shortage globally. The phone will now be available “more widely” around the Diwali festive season instead of September 10.

“This additional time will also help mitigate the current industry-wide, global semiconductor shortages,” Jio said in a statement.

Both Jio and Google have begun testing the JioPhone Next with a limited set of users for further refinement, as per the official statement.

IDC’s research director Navkendar Singh said that Jio’s decision is understandable considering the component shortage and supply chain challenges plaguing the consumer electronics space.

“Though smartphones are not as challenged now as other categories like Laptops and TVs are. JioPhone Next will be using some specific components as a budget smartphone, which can be more challenging than brands which are focussed on midrange and premium space,” Singh said, adding that this will not impact the festival season sales or other brands much.

As per IDC estimates, the next few weeks are very crucial for every brand and they are trying to get maximum stocks for India, which is the second largest market globally.

Strategy Analytics’ analyst Abhilash Kumar said that the components prices have soared globally, which means it would be difficult for Jio to launch devices at a decided price point.

“Shifting it near Diwali will also help in controlling the pricing as the shortage issue would be somewhat resolved by then. This time cushion will also be helpful in advanced testing and to rectify the glitches identified during different levels of testing,” he said.

As a consequence of the pandemic and associated restrictions, there have been widespread disruptions across the semiconductor chip manufacturing ecosystem. With consumer demand for electronics spiking in an ‘everything from home’ context, and chip supplies in short supply, smartphone brands have been affected to varying degrees.

An industry executive on the condition of anonymity told ET that the components shortage, especially semiconductors are creating problems for all bigger OEMs that typically secure inventories in advance. Jio, which is not a regular OEM at the global scale, will have to face similar challenges rather at bigger scale if they plan to flood market with large amount of units of JioPhone Next.

Prabhu Ram, Head-Industry Intelligence Group (IIG), CMR said that smartphone brands have been adapting various strategies to cope with the current short supply, including price rises or limited geographic launches. “While leading global smartphone brands have stockpiled components, the chip shortages have been affecting the smartphone market across the board. It has led to increased prices for components, making end devices more costly.”

With JioPhone Next being a pivotal cog for Jio’s goals of feature phone to smartphone migration, it makes sense for Jio to delay its launch and augment chip supplies, Ram said.

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