Google’s Android One Initiative Could Affect Samsung

img_0362Google launched its Android One platform for smartphones earlier this week, working with three Indian smartphone manufacturers and MediaTek ? a Taiwan-based chip designer ? to offer smartphones that cost a little over $100. Through the Android One initiative, Google is looking to improve the quality of the user experience on low-priced Android smartphones, enticing customers in emerging markets to upgrade from feature phones, eventually driving users to the company?s search and internet services. Google plans to expand the program to other markets such as Indonesia, Pakistan, the Philippines and Bangladesh, with vendors including Panasonic, Asus, Acer, HTC, Alcatel and Lenovo participating as hardware partners. We believe that the move could pose a threat to Samsung ? the world?s largest smartphone manufacturer ? potentially compounding its market share woes in emerging countries, where we expect much of the growth in the smartphone market to come from.

Trefis has a $1,200 price estimate for Samsung, which is about in line with the current market price.

Android One Should Address User Experience Issues On Low-End Phones

Smartphones priced below $200 account for about 81% of the Indian smartphone market, according to IDC. While several manufacturers have been offering smartphones at price points of around $100, many of these devices have been plagued by weak hardware specifications and an inconsistent user experience, since vendors often use older, modified versions of Android bundled with their custom apps. However, with Android One, Google will partner with hardware manufacturers, providing them with a template of sorts for designing smartphones. Google will have greater control over the Android software on these phones, providing timely updates to the latest versions of Android for two years, while limiting the level to which manufacturers can customize the software on these phones.The company is also partnering with carriers to offer free data services for a period of time.

Samsung Contending With Shrinking Market Share In Emerging Markets

Samsung has been facing heat in the low and mid tier of the smartphone market, with manufacturers such as China?s Xiaomi and Lenovo eating into the company?s market share in the sub-$200 segment by offering products with high-end specifications at low prices. The company shipped 15% fewer smartphones in China during Q2, and lost its top spot to Xiaomi. The company has been losing ground in the fast-growing Indian market as well, with its market share falling to around 29% in Q2, from around 35% in the previous quarter, while local vendor Micromax saw its share rise to around 18% from 15%. The introduction of the Android One platform could further add to the company?s troubles.

Android One Could Impact Samsung

While Samsung offers smartphones at price points of around $100 in emerging markets, they haven?t been particularly well-reviewed owing to their inconsistent software experience, although they have sold quite well. For example, Samsung?s Galaxy Star Pro and Galaxy S Duos 2 ? which are the two best-selling smartphones in India ? run on versions of Android that are at least two versions older than higher-end devices, and offer lower screen resolutions. Given that customers at the low end often bank on their smartphones to be their primary computing devices, they could veer towards the better software experience and better performance that Android One devices could offer. While Samsung could decide to join the Android One program for its low-end devices, it would reduce the level of product differentiation that the company offers, since most Android One devices will ship with nearly identical hardware specifications. Additionally, given that the program has several smaller manufacturers, the company could run the risk of diluting its brand image.


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