Business mogul Mukesh Ambani had a plan to conquer the Indian smartphone market with a locally assembled Google-powered smartphone. But unfortunately, this plan is facing supply-chain disruptions and the rising component prices are suppressing production volumes significantly.

With the unveiling date set to be held on June 24, and an official debut in mid-August, Ambani has lowered his sales expectations. India is the world’s fastest-growing smartphone. Its internet users are expected to cross a massive 900 million users by 2025. As always, Reliance wants to make its mark in a boosting industry. Once again they rely on their aggressive pricing strategy.

Reliance has a lot of competition in the market with companies like Xiaomi Corp., Oppo and OnePlus. These companies have already set up local manufacturing facilities and serve the same audience.

Reliance’s Big Plan

Google-Jio Smartphone tie-up meets Supply Chain Problems

Engineers at both Reliance and Alphabet Inc.’s Google have come together to create a hardware design and a version of the Android OS which delivers a high-end experience at an affordable price. But the coronavirus pandemic has created problems for the tech mammoths as well. The pandemic has boosted demand for electronics worldwide creating a major supply shortage.

The Looming Problems

Various cultural differences have also risen between the partnering companies. While Reliance relies on a top-down operating model, Google has a more self-directed approach. This has resulted in some last-minute decisions and mid-night calls. This goes against Google’s way of being planned months in advance. A recent meeting between Reliance and Google failed to come to any conclusion with respect to the hardware specifications. There has been a looming uncertainty over hardware choices because important parts like displays and chipsets are in short supply.

While earlier these parts could be procured in 30 to 45 days, now the time has increased to 60 to 75 days. There are shortages of parts in China, the country which produces and supplies components for almost every possible smartphone on the planet.

According to sources, microprocessor prices have nearly doubled from 5 cents to 9 cents in a couple of months. These microprocessors are vital to smartphone battery chargers. Display prices have also increased by almost 40%. Chipset bulk allotments are also getting difficult to get hands on.

The Surface Mount Technology machines which assemble thousands of smartphone micro-components every hour are also facing short supply. The waiting period for these has increased from 45 to 60 days to almost 6 months. Google and Reliance’s worries do not end here. Shipping costs have shot up as well. According to a person at another Indian contract manufacturer, a 20-foot container shipping from China to India used to cost $800 pre-pandemic. Now these prices skyrocketed to as high as $5,000.

What Now?

Reliance and Google had shaken on the project last July. For the last nine months, Google engineers had the challenge of creating a premium software experience at an affordable price. These barriers have proven harsh for both companies and they are looking forward to making better decisions with the options in hand. We hope the companies can work their differences and collectively solve their shortage and pricing issues soon.