China is the world’s largest mobile market and has been the focus of the technology industry in 2015. However, that may soon change. India has a growing demand for smartphones and is expected to surpass the United States in 2017 as the world’s second largest smartphone market.
In response to this increased demand, some of the largest companies in technology and mobile are beginning to shift their focus from China to the growing market in India. Businesses such as Apple have begun making heavy investments in India and have been rewarded with huge increases in sales in the country. Apple invested more in marketing and production in India and was rewarded with a 93% increase in iPhone sales in the third quarter of 2015.
However, Apple only has a 2% share of India’s smartphone market, and it is still an attractive investment for companies looking to grow international sales. Google (NASDAQ: GOOGL), for example, is implementing an Android One smartphone project in India, making it the centerpiece of its investment push to capture demand by increasing Internet access and creating new products for the country.
Google’s Investment Strategy in India’s Smartphone Market
Google is investing in India’s smartphone market through the allocation of resources to its Android One program. This program lays out a set of specifications that help manufacturers develop cheap, high-quality smartphones. Android One is one of the most important initiatives that Google is investing in to continue its dominance in emerging markets. Its main focus with Android One is to implement it in countries where customers might otherwise be unable to afford Android-operated smartphones, most notably in India.
Phones made by manufacturers under the Android One standard are priced at around $100 and were introduced to the market in 2014. Google plans to target the cost-conscious part of India’s smartphone market with phones between $30 to $50 to drive mass adoption.
Google will invest in its Android One program and work with manufacturers over the next few years in order to bring high-quality smartphones to the marketplace and drive prices down to the company’s target price. If Google is able to achieve mass adoption of Android devices in India, Android One will be one of its best investments. India’s fast-expanding amount Internet users is expected to surpass 500 million by 2017, and any smartphone company that can gain the most traction within the country will benefit greatly.
Google’s Challenges in India
Google will face challenges in India, even though it provides a great investment opportunity. The country’s market for digital marketing, Google’s main revenue driver, is small. Additionally, flagship products such as YouTube and Google Maps require fast Internet speeds to work on mobile, and they may not work properly in India.
However, these challenges provide another investment opportunity for Google. The company plans to move forward with a large-scale investment program that will bring millions of Indian companies online and develop content suitable for a country that doesn’t speak English as a first language. The program will also create products that work with slow data or Internet connections. This should further drive demand for Internet and smartphone devices.
Google’s Financials
If Google is able to invest in the growth of India’s smartphone market, its revenue will increase. Additionally, smartphone manufacturers take the burden of building and selling the devices, meaning that Google will be able to increase revenue without increases to operating costs or costs of goods sold.
Since Google develops the operating system that runs these smartphones, any Android-operated smartphone sold benefits the company. Any increases in the Android market share of India’s smartphone market will increase profits and cash flow for Google, giving the company the opportunity to pay out more dividends, pay down debt or save more cash on hand for other investments.
Credit: Evan Tarver (business development specialist)
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