Distilling market noise into market sense

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Low cost Android: crossing the $100 barrier

[Where’s Google’s Android going? Guest blogger Ben Hookway uncovers the race for low cost Android taking place behind the scenes of the mobile industry, and how this may change the face of Android as we know it]

Low cost Android devices have been forming a large part of R&D activity for some time now. Behind the scenes of the mobile industry all major players – including semiconductor vendors, software vendors, software services companies, ODMs, OEMs, and network operators – are putting considerable resources into rolling out low cost Android phones. It’s a silent revolution in the making that, once set in motion, should see Android shipments lift off from the single-digit millions.

So how low is ‘low cost’? Reports of $75-$110 reference designs are emerging from Asia; these are fully featured touchscreen devices, albeit with an EDGE (2.75G), rather than a 3G baseband chipset.

Why the interest in low cost Android? Low cost means volume which in turn means market share, and a consistent platform for the provision of services. There are multiple parties with a compelling interest in having a low cost Android device.

Semiconductor companies are under pressure to better address the market for  Android platforms. Qualcomm is the overwhelming leader in 3G chipsets for Android phones in Western markets. Their competition such as ST Ericsson, Broadcom and Infineon are responding and a low cost Android niche may be a way for them to break into the current Qualcomm dominance.

The majority of handset manufacturers are investing heavily in Android. With so much effort going into a single platform, there is an inevitable pressure to be able to scale that platform on as wide a range of phones as possible. While the lion’s share of press coverage is on ‘smartphones’, the mass volume still is in lower end devices.

Network operators are already developing and deploying ‘operator packs’ comprising of specific operator applications and service enablers, designed to run on Android devices. Longer term, Android may end up affording operators the standardised  platform for devices they have been craving for years; a standard platform they can consistently deploy their own ‘pack’ on. That’s assuming operators can gain access to low cost, mid-range Android devices on which they can deploy standard operator packs on and therefore extend the operator experience to the mainstream consumers.  Moreover, with subsidies widely practiced in the mobile industry, it is in the best interest of the operators to reduce the cost of Android phones.

Google’s brand power hurts Android differentiation
There has been much mainstream publicity on the launch of the Nexus – yet another Android smartphone – which does not seem to be materially different from – say – the Motorola Droid. The reason for the mainstream press is simple. Nexus is a phone sold by Google, not by a phone manufacturer. The brand is king here. As an experiment, I did a straw poll on my Facebook network of (mainly) non-industry friends. Out of 100, only 2 people knew what Android was in the context of mobile phones. They all knew who Google was though. Google is a brand people will buy, Android is not.

This powerful brand recognition enjoyed by Google forces Android-based manufacturers to further differentiate their devices. After all the general public will buy a Google phone over an Android phone so you had better come up with something different. This may force manufacturers to ‘hack’ Android more and more in order to differentiate, and low cost could be a means to the same end.

So if low cost Android is going to emerge as a category how are we going to get there and what are devices going to look like? Perhaps more importantly, would you buy one? If the user experience is radically different to Android smartphones, is there still a place for a low cost Android device? For example, if you didn’t have fancy graphics, smooth transitions, or if the touchscreen was a bit harder to use, or even if there was no touchscreen at all?

Low cost means design sacrifices
Well, the cost of phone components is going to have a big influence on what low cost Android devices look like and what are they capable of. They may even be unrecognisable as Android phones by current standards.

As an example, iSuppli’s teardown of a G1 estimated the cost of components as $143.89. Of this cost;

– Baseband (ARM11 for multimedia, ARM7 for modem): $28.49 (20% of BOM)
– Touchscreen: $19.67 (14% of BOM)

Baseband and touchscreen are the two biggest cost factors. Reduce the requirement for expensive processors and touchscreens and you go a long way to lowering costs.

Therefore, running an Android device on a single core chip would reduce costs significantly. A single core EDGE chip sales for well under $10 – but the question is how to run Android on it. A quick tech lesson in basebands is in order here.

Baseband chips are needed to run the modem (software) stack in a phone. To run a modem you need a real time operating system such as Mentor Graphics’ Nucleus or ENEA’s OSE. However, each chip core (CPU) can only run a single OS, and the modem needs an RTOS to power it, so how do you run Android?

Virtualisation to the rescue
The answer may lie in virtualisation of the modem chip. Using hypervisor technology from Open Kernel Labs or Virtual Logix, it is possible to run two operating systems on the same CPU. This would enable the RTOS and Android to co-exist on the same core, and open up single core EDGE chips to Android. Such an approach requires close cooperation from the RTOS, semiconductor and virtualisation companies, but could lead to a significant cost reduction for markets that do not need 3G capability.

To touchscreen or not to?
One of the largest cost factors in building an Android device is the touchscreen. An Android device could be built that eliminates the need for a touchscreen – but would it be a hit with consumers?

If an attractive feature phone can be produced with Android at the right price point, then does the consumer care what OS is under the hood? I would argue the vast majority of consumers don’t care. Such a device may even run a restricted number of applications with no access to an app store.

Would you use an Android phone with no touch screen and no QWERTY keyboard? Probably not, but then if you are reading the VisionMobile blog, I’m guessing you are not your average consumer?

The operator would appreciate having the same “standard” platform to deploy their operator packs on; the OEM would appreciate having the same platform to develop their ‘signature’ apps on, even if it this platform have fewer features. With a smaller, non touch screen devices, graphic processing requirements are reduced, and therefore processor requirement and cost is reduced.

However, there is an obvious side-effect here; will the applications developed for Android touchscreen devices also work on low-cost Android phones?. Would the buyers of the non-touch devices care or even know?

I would contend that the consumers that buy low-cost devices over the next 2-3 years won’t care about the apps. If the consumer wants a mid-low price touchscreen phone then there are a wide number of feature phones available (see Guy Agin’s excellent article on dispelling the smartphone craze).

The inevitability of low-cost Android
All in all, the push towards low cost Android is inevitable. There are simply too many companies in the value chain who are racing to differentiate with low-cost Android. But due to cost reasons, the form factor, functions, target segment, and use of the resulting devices is going to be significantly different from what we understand as an Android phone today.

Comments welcome as always,


[Ben Hookway works for Mentor Graphics in Business Development. He has founded, financed and sold companies in the mobile software sector over a 15 year career]

  • David Almstrom

    Ben points out a really interesting thing which really is the million-dollar question whether or not Android is relevant in the low-cost segment*.

    "Would the buyers of the non-touch devices care or even know?

    I would contend that the consumers that buy low-cost devices over the next 2-3 years won’t care about the apps. If the consumer wants a mid-low price touchscreen phone then there are a wide number of feature phones available"

    And therefore, all the work taking Android there may be in vain. In the segment of low-cost in the developed markets are mainly controlled by Nokia, Samsung and LGE with now 70% world-market share and even large in the low cost segments outside India/China and a break-in there for Android devices would be by operator branded phones or new brands – and that is far more difficult than getting Android running on an ARM11 baseband with a virtualized linux kernel.

    *Low cost for me is not a BOM cost of $100 but rather hitting the $40-60 BOM, which requires a single-core baseband solution – and at least for the foreseeable future.

  • Good read. Thanks.

    What you're describing sounds rather like a Nokia, no?

  • Hi David, Thanks for the comments. I agree with much of what you say. The OEMs with mature, internally developed application frameworks (Nokia, Samsung, LGE) don't have a compelling reason to move to Android at the low end. They are expert at producing a high number of feature phone models with software they know well.

    However, for some other companies with either less suitable software frameworks, or less software expertise, Android may prove an attractive path if the BOM could be achieved.

    Motorola, with their extensive investment in Android and and aging P2K feature phone platform could be a candidate here. Pure speculation on my part though.

    Best, Ben

  • Hi Gabriel,

    Glad you enjoyed the article. Not sure what you mean with the Nokia reference. I didn't set out to describe Nokia – honestly!


  • Michael Vakulenko

    Yes, absolutely, operators are playing key role here.

    Average consumer may not care about apps when buying low-cost touchscreen phone. However, once the phone is in their hands, many are asking: "What else can I do with this thing?".

    This is where Android apps and, not to forget, Android HTML5 web browser are getting into play, creating post-sale revenue opportunities for operators.

    IMHO, this is relative advantage Android has over other feature phones solutions.

  • Greg Sandy

    Hi Ben,

    I think that the android platform is definatley more appealing to the operators than the users. Customizing and preloading apps to target a market segment, makes more sense for them. As a user, I won't buy a phone, thinking that I may be able to get "an app for that". That may come later in the experience, as with the iphone, and all the stupid apps they sell. My phone, better open and edit word and excel docs, and view pdfs. Also, I need push mail and the ability to run multiple IM programs.

    Cost is not as relevant here in the states, as most all providers subsidize phones for contracts. I just bought a BB 9700 for $147 with a 2 year contract, it would have been $450 without said contract. Single priced unlimited data leaves very few opportunities to increase revenue, outside of apps and customization.

    To me the android is a perfect platform for a provider/operator to realize their version of a killer app phone, by somehow customizing, and managing a marketing message to the target.

  • Ben,

    A very refreshing view on Android's potential to penetrate the feature phone segments.

    A question that I have – you mention Android's potential to become "the" standardized platform for operators. I follow and agree on your logic, but for that to happen, wouldn't OEMs need to make the decision to solely focus on Android? Apart from Motorola I do not see that happening right now.

    From my conversations with OEMs I got the feedback that there is an inherent fear that Google might become too powerful, and while all Tier-1 OEMs except for Nokia have Chassis 1 and Chassis 2 Android devices, all of them (except MOTO) are still running multiple platforms, and consistency is achieved through a single UI. Sony Ericsson is probably a good example with their Rachael UI.

    Having said that, with the virtualization approach you describe, I agree you could bring Smartphones to the masses, particularly in countries like China and India. It would be interesting to see how Google then could figure out to monetize those markets.


  • Alex Neuenfeld

    Of course we want low cost Android. But we want it in a full featured handset or netbook / tablet, not in some flimsy "feature phone". The promise of the 100$-laptop has been here for a long while now, since OLPC first annouced it. The cost of hardware will hopefully go down and we will see a really nice device for the people.

    Charbax from armdecices.net has already put his hands on a $95 10″ Android VIA-ARM powered laptop.

  • good and nice article. got many things that i dont know before.

  • Mitch

    I agree with you. When will there be a full featured netbook/laptop that is low cost running on the Android system? I want the $100 laptop too. I'm sure the cost of hardware and laptop batteries will go down eventually. I am definitely interested in reading about Charax's Android VIA-ARM powered laptop. Did he like it?



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