The maker of the $4 smartphone is now asking the government to pitch in $7.4 billion to avoid losses
It’s always too damn good to be true. We’ve been seeing price tags of Android phones get lower and lower for years now. The $10 Walmart phone was an amazing achievement for the market, no matter how underwhelming the actual device is.
So when we heard of a $4 smartphone, our eyes popped open. How in heaven’s name can any company — especially an unknown startup in India — afford to make $4 smartphones without losing money? What’s the trick?
Turns out, there is no trick. Well, they tricked us alright. The company has come out to hit the government with a surprise, last-minute request before the smartphone even hits the ground: a $7.4 billion injection to help ensure their business doesn’t totally collapse.
You see, RingingBellls — the maker of the phone entitled Freedom 251 — was losing about $13 per unit in production. RingingBells’ plan was to use advertising and app deals to make up the cost, but those deals have only been able to bring the loss figure down to $2 to $4 per unit. They’re still taking massive losses.
The purpose of the government subsidy is to help them reach a goal of bringing smartphones to some odd 750 million Indians who can’t quite reach the current price barrier standard in the country. They’ve even conceded that the government can take over the operation if they want, as their true and only goal is to help empower the India people.
And that sounds all fine and dandy, but how can anyone be sure this company can operate at scale? Their initial production estimates went from 200,000 launch units down to just 5,000, and they aren’t sure they can make any more than that without the financial help. To that end, they say the government is even free to use the Freedom brand and go with an entirely different manufacturer if they fulfill the subsidy.
But by then, it all starts to sound like a big scam. Talk up a big initiative about putting phones into every hand. Propose the government pays for it. Let some other company do the heavy lifting of manufacturing. Sit back while you collect ad revenue from the apps pre-installed on those phones.
I’m not privy to the inner-workings of RingingBells or their plan to actually get a $4 phone off the ground, but I’d probably steer clear of giving these guys any money until these phones are actually available to buy. In the meantime, there are phones that cost just a few bucks more that you can look into right now, so be sure to consider those options if this situation seems just a little too fishy for you.
[via India Times]