Reliance Jio: Supply Chain Disruption Hits Jio 5G Smartphone

Ahead of the much-anticipated Reliance AGM 2021, Jio 5G Smartphone is already facing headwinds, with major supply-chain disruptions and rising component prices. These factors can stall Mukesh Ambani’s plan to conquer the Indian market with a locally assembled Google-powered smartphone.

Jio 5G Smartphone in Trouble?

RIL had planned sales in the hundreds of millions in the first years for the inexpensive device. However, given the snags, it is targeting a small fraction of that at launch, sources report. As reported previously, RIL looks set to launch the phone at its Annual General Meeting, on 24th June. An official debut will follow; as early as August or September.

Of course, Mukesh Ambani wants to play the pricing game the same as he did with Reliance Jio. However, if the delays keep up, Reliance and its partners are looking at a significant setback.

Vital parts like displays and chipsets are in short supply due to the pandemic. This factor further contributes to the uncertainty to the decisions over hardware choices. Now, it takes 60-75 days to procure such materials, which was 30-45 days before the pandemic. Shortages in China have caused problems for every smartphone maker, as the country supplies a majority of the components.

The prices of key components have gone up too. According to a person working for an Indian contract manufacturer in talks to assemble the Reliance-Google device, a microprocessor that goes in charger has nearly doubled in price, from 5 cents to 9, in a matter of months. Display prices have also shot up 40% in the same time. The person also said that placing bulk orders for chipsets is getting more and more difficult.

There are issues with assembly as well. There are delays with delivery of the surface mount technology machines. These machines are used to assemble thousands of smartphone microcomponents an hour. The timeline now stretches to 6 months, compared with 45 to 60 days as recently as January.

That's not all - shipping costs are another of the issues. A 20-foot container from China to India that cost $800 pre-pandemic jumped as high as $5,000 and now goes for $3,600.

These challenges have complicated the matters for the co-branded, 5G-ready device.

Reliance Pushed Big for Smartphones After Google Deal

Reliance and Google have partnered to create a device for the technology-hungry but price-sensitive country that is India. Creating a hardware design and an Android version that can deliver high-end experience at entry level materials is the key idea behind it.

However, as mentioned above, sourcing the components has proved a hurdle. The coronavirus pandemic has boosted demand for electronics globally and that led to shortages.

Things are not as straightforward as component shortages, however. Cultural differences at Reliance and Google have also surfaced during the process, complicating the matters. Reliance is relying on a top-down operating model while the Google is more self-directed, sources report.

Last July, Reliance and Google struck a broad alliance, and started the project. Google engineers have been working on how to deliver Android experience at unfathomably cheap prices. They are working to make the operating system more responsive and resilient to crashes with frugal hardware. However, this is not something entirely new to them - Android One was not so long ago, after all.

Ambani has drawn more than $20 billion in investments from US giants including Google. Beside the Jio 5G smartphone, at the AGM, he is set to give an update on collaborations with Qualcomm and WhatsApp on 5G and e-commerce, respectively.