Qualcomm's contrarian call: Bets on faster adoption of 5G phones in India

The US chipset maker plans to stay a step ahead of the market by launching products to power cheaper smartphones even before services are launched

In popular perception, the impending upgrade to 5G telecom services is for premium subscribers. Qualcomm Inc hopes to change that notion in India. Working on the “5G for all” mantra, the San Diego, California-based chip designer is getting ready to launch its upcoming Snapdragon 400 chipset some time in this quarter to mobile manufacturers in India that could reduce the cost of 5G phones to below Rs 15,000.

“I may be making a bold statement on behalf of the industry, but by 2022 the majority of the smart phones in India would be 5G in both the upper and lower end of the market,” said Rajen Vagadia, vice-president and president of Qualcomm India & SAARC.

Qualcomm has made an aggressive beginning to achieve these objectives. Its chipsets have powered 18 models of 5G phones in the Indian market from vendors that include Apple Inc, Samsung and Xiaomi. Analysts reckon that one million 5G phones have been sold between July and September, more than six times last year’s sales, predominantly powered by Qualcomm chipsets.

Now, Qualcomm proposes to reverse the sequence that 4G followed in India, where networks upgraded before 4G handsets were available in sufficient numbers, limiting its adoption. That is why, for instance, Reliance Jio had to outsource the manufacture of its low-cost 4G VOLTE handsets from Taiwan to achieve the mass adoption of the services it needed. “What we are doing is creating a device ecosystem with 5G phones so that operators are encouraged to offer 5G services,” Vagadia explained.  

Could this amount to putting the 5G cart before the horse? For one, the government is yet to clarify when it proposes to auction spectrum for 5G services. It is clear that this won’t take place simultaneously with 4G spectrum auctions, expected in January-February 2021. For another, spectrum availability has not been fixed and the band and base auction price is still to be discussed by the Telecom Regulatory Authority of India. Even optimists reckon that the 5G rollout have to wait till 2022, given the low enthusiasm among financially stressed telecom companies.

Yet Qualcomm is betting on the faster adoption of 5G even though 400-500 million customers — of the country’s 1.2 billion subscriber base — still use a 2G device. The chipmaker believes that by 2021, 5G phones will make up 60-70 per cent of the smartphone market — and they will be available at prices ranging from Rs 20,000 and, with a little bit of help from Original Equipment Manufacturers (OEMs), to Rs 15,000. But with a bit of more aggression from OEMs, prices could drop to Rs 10,000, the threshold of the mass market.

The US company’s confidence comes from the fact that it has succeeded earlier in expanding 4G usage to the mass market through a tie-up with Reliance Jio (the company has a small equity in Jio Platforms and works closely with the group’s US company, Radisys, which is working on 5G software).

Vagadia said the company had stopped making chipsets for 4G phones across the world, but restarted it at Jio’s insistence. Those in the know say that Jio gave them a large one-time order. The two worked to build a low-cost 4G feature phone bundled with data to woo 2G customers to upgrade, which entailed buying a new phone at a nominal cost. The strategy worked: Jio managed to grab 110 million customers, taking it well ahead of its nearest rival, Vodafone Idea.

Qualcomm is encouraged by the fact that it is already seeing clear signs of some aggressive pricing from OEMs of 5G phones. One Plus, for instance, launched Nord, a 5G phone powered by Qualcomm’s mid-market chipset at just over Rs 25,000. Vagadia said such a price from an OEM would be unheard of a year ago.

The US company has also responded to the requirement of emerging markets such as India to reduce to time cycle for bringing out lower-cost chips within the same family. For instance, Snapdragon 400 is being launched just two years after the premium chipset in this family was introduced in the market. Earlier this gap could be three to four years.  

Not every vendor is, however, jumping on the 5G bandwagon. Said Hari Om Rai of Lava Mobile, which might look at 5G phone manufacturing sometimes next year: “Of course one can make a 5G phone for Rs 15,000. But questions are why should customers pay a premium when one does not know when the service will begin?”

Qualcomm also has to contend with competition. Its key rival, Taiwan-based MediaTek, has recently announced that India is one of its key markets for 5G chipsets and it has just launched its mass market chipset to rival Qualcomm’s. But its strategy seems more measured. Kuldeep Malik, director, corporate sales, said: “We don’t think that a majority of the market will shift to 5G devices before end of 2023, or maybe in 2024. Most vendors have a clear 4G device path and these services will continue for another two years. Till then, vendors will always have a premium on 5G phones over 4G, though that will, of course, narrow.”

The Taiwanese company does not have any 5G device in India powered by its chipsets, but expects some deals next year and is in talks with operators and OEMs. Malik said the sweet spot in terms of pricing would be in the range of Rs 10,000 to Rs 30,000, which accounts for 70 per cent of the market and that is where OEMs should concentrate. The service may be awaited, but 5G is where the action will be in the months ahead.