India’s $4 phone: a manufacturing miracle?

Posted on 22 Feb 2016 by Michael Cruickshank

An Indian phone company has drawn headlines recently with an announcement that it will sell a smartphone at an unprecedentedly low price.

The device, called the Freedom 251 will reportedly sell for just 251 rupees ($3.66) making it by far the cheapest such phone in the world.

Produced by a little known company called ‘Ringing Bells’, the smartphone contains similar functionally to many low-end phones ten times its price. Such specifications include a 4-inch display, a 1.3-GHz quad-core processor, and 8 GB of storage.

Should such a phone be possible to sustainably manufacture, it would radically increase the availability of mobile communications and the internet for millions of the world’s poorest people.

Too good to be true

Unfortunately, while Indian manufacturing is cheap by global standards, the ability to produce a $4 smartphone is likely still beyond its reach.

Following the initial announcement of the Freedom 251, many industry analysts have lined up to dampen hopes of this device being a market game-changer.

Specifically they point out that irrespective of the cost of labor in India, the parts used in the phone add up to far more than the sale price of the device.

According to the Indian Cellular Association, even using the cheapest possible parts, the phone would cost a minimum of around $40 to manufacture. This industry body has since filed a complaint with the government over the marketing of the phone.

Speaking to CNN, Richard Windsor, from Edison Investment Research echoed similar criticisms.

“This launch has generated a lot of waves, and we suspect that either after the first batch has been sold, the price goes up to $53 per device or that the company quietly disappears,” he said.

With this in mind, it is highly likely that this $4 smartphone is more of a marketing stunt designed to draw attention to a fledgling company.

Alternatively the device could be sold as a ‘loss leader’ in very small and limited quantities, while a marginally better, but much higher priced device makes up the bulk of Ringing Bell’s profits.