JioPhone Next: Reliance might spend Rs 18,750 crore as subsidy to keep cost close to Rs 4,000


Reliance Industries (RIL) may have to spend almost Rs 3,750 crore or 25% more on subsidies than that estimated before in the event that it intends to price its upcoming budget 4G cell phone, JioPhone Next, at about Rs 4,000 each as costs of semiconductors and different components have gone up in the midst of a global shortage, the Economic Times referenced in a report refering to experts.

“We reckon if RIL prices the JioPhone Next smartphone at around Rs 4,000 and looks to sell 75 million units, the subsidy element per handset could rise to around Rs 2,500, or Rs 18,750 crore overall,” an unnamed analyst at a leading brokerage told ET.

“This is due to a near 20% rise in component prices, particularly memory and LTE (4G) chipset costs, coupled with procurement delays and the continuing global shortage of semiconductors.”

In June, IIFL Securities had estimated that RIL may have to subsidize consumers to the extent of Rs 15,000 crore in the event that it targets selling around 75 million units, at Rs 2,000 subsidy apiece.

Worth mentioing here is that Jio Platforms, RIL’s digital business unit, as of late conceded the launch of JioPhone Next, created with Google, to around Diwali — from September 10 — because of the worldwide semiconductor shortage. Examiners said a key challenge for the organization is the way it deals with the component supply chain.

“Jio could also explore a ‘buy now, pay later’ scheme to galvanise JioPhone Next sales, where the upfront sum could be kept low to attract value hunters with an option to pay the balance in easy, multiple instalments,” the financial daily quoted another analyst as saying.

On the off chance that the chipset deficiency endures for additional quarters, RIL could at first do a token JioPhone Next launch in certain markets around Diwali and think of a fullblown launch once part costs stabilise and semiconductor supplies standardize, said the second expert.

Brokerage UBS had said in June that regardless of whether Google and Jio develop a lighter operating system, the cost decrease would be conceivable just in few areas like display (around $5) and memory (around $4), which would make a $50 bill of materials (BOM), or cost of the gadget, intense to achieve.

Jio is known to targeting on a 500 million client base — from around 425 million now — as it expects the JioPhone Next 4G cell phone to make India “2G-mukt (free)” by targeting a chunk of Bharti Airtel and Vodafone Idea’s 300 million 2G feature phone user base.

The organization has not uncovered JioPhone Next’s probably pricing.

Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Economy Port journalist was involved in the writing and production of this article.

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