Samsung to make the Tizen Z1 in India, but can the phone compete with rivals?

The Samsung Tizen-OS phone, the Z1, may seem like just another phone launch amongst dozens that take place every month in India, the hottest smartphone market in the world, where a little under 70 percent of the population still operate "dumb" feature phones.

But it's not. It has a multitude of narratives wrapped into it, the most important being Samsung's future in the country. The latest news that extends this conversation is the company's announcement yesterday that the Z1 will soon be manufactured in India.

India, of course, is thrilled, since it's been desperately trying to attract manufacturing projects into the country. It has hordes of unemployed youth, 47 million of whom were not employed in 2011, and one in three graduates up to the age of 29 does not have a job, according to a Labour Ministry report. Millions of youth just sitting around with nothing to do could have a catastrophic effect on social stability, and India knows this.

It is generally thought that the largest panacea for modern industrial economies and unemployment is manufacturing. India has a giant services economy (over 50 percent), but an anemic manufacturing one. In order to fix that, the last government gave birth to an ambitious "National Electronics Policy", which envisioned Japanese- or Korean-style clusters housing cutting-edge companies with state-of-the-art technologies that would help build an entire electronics manufacturing ecosystem. This also included the ambitious task of building of a semi-conductor fabricator.

Another reason for doing this was because of India's sizeable and ballooning electronics imports that would be equal to the country's oil import bill (around $400 billion) in just 15 years. Consequently, the existing government under Narendra Modi has extended that idea in the form of a "Make in India" campaign. Of course, critics point to the shabby state of the country's infrastructure -- decrepit roads and unreliable power -- not to mention rampaging corruption, exorbitant cost of land, and weak supply chain links, and scoff at the notion that anything like what is to be found in the Far East can be replicated here.

Therefore, Samsung's announcement by the company's India vice president of Marketing (Mobile and IT) Asim Warsi that the company's Noida plant, which has a capacity of 4 million phones a month, will soon be manufacturing the Z1 has got a lot of people excited for all the obvious reasons.

The $92 (Rs 5,700) Z1 phone is targeted at a huge population of 800 million people who have yet to upgrade to a smartphone, so capturing a chunk of this market could be pivotal for the company. The excitement is doubly so because Samsung, despite its blue-chip brand and superb high-end phones, has been losing out to homegrown rivals such as Micromax and Karbonn, which have dominated the lower end of the market. Consequently, Samsung's India share has dipped, according to research firm IDC, from 35 percent in Q1 '14 to 29 percent in Q2 '14. Its global profits have also taken a big hit.

Some reasons for this have been market saturation, lower average selling price as the company has shifted focus to lower-end devices, and fierce new competitors in important markets such as Xiaomi. Now, it is hoped that a low-end phone for the masses, a space that Samsung has never really played in, will bolster its position in a vital market such as India and boost its global fortunes.

The other big story is that success in manufacturing the Z1 in India for sale -- apart from saving big costs in supply chain and time to market -- will also be a huge boost to the fortunes of Tizen, Samsung's OS that was developed along with Huawei Technologies and Intel. According to Nomura's CW Chung, Android provides a major hit on the Korean major's margins. There is also the hard-to-ignore fact that out of the 60 million TVs being sold this year by Samsung, 30 million of them will be powered by Tizen, and the India Z1 plan will undoubtedly help the company in its efforts to spread the Tizen gospel and aid in the creation of a Tizen ecosystem.

But it's not going to be easy. One indisputable fact is that the Z1's launch has been aborted a number of times in other markets, according to The Economic Times -- specifically, in Japan, France, and Russia. Then, there are recent reviews that suggest the phone is not up to snuff, at least with regard to the competition it faces. IDC analyst Karan Thakkar said that the Z1 may be cheap when it comes to price, but for a few dollars extra, a shopper could get a whole lot more.

"It's not always about the cheapest; customers are looking for specs... There are already a plethora of devices running on Android that Indian customers can choose from," Thakkar said in the Reuters article. The same article quoted one consumer likening the Z1 to a phone from 2010 thanks to its undernourished front-facing and selfie cameras.

Naturally, Samsung thinks the Z1 is a competition beater: "The compelling proposition of an easy-to-use and clutter-free interface, along with premium design, has met wide consumer acceptance," suggested Samsung India head Warsi, and added that up to 55,000 units have been sold to date since its launch on January 24.

Samsung is known for quality products in India, and has a superb reputation when it comes to its higher-end phones. But can it play the game on the lower end? The Z1, for instance, at $92 (Rs 5,700), has a 1.2GHz dual-core processor, 768MB of RAM, and a 4GB internal memory expandable up to 64GB. It features just a 4-inch display, a 3.1MP rear shooter, a VGA front camera, and a 1,500mAh battery.

The 4G A6000 Lenovo smartphone, which I wrote about a few days ago, was just launched in India for a few bucks more at $113 (Rs 6,999). It comes with Digital Dolby speakers, a 720p display, a 5-inch screen, a 1.2GHz Snapdragon 410 quad-core 64-bit processor, 1GB of RAM, 8GB of storage, an 8MP main camera, and a 2MP selfie camera. It simply destroys the Z1 for less than what you would fork out for a couple of decent movie tickets and a large pizza in the country -- although we will have to wait for an official verdict when both phones are test driven in a face-off.

The phone similarly has nothing on the Micromax A1 (Android One), which, for $10 extra, comes with a 1.3GHz quad-core processor, a 5MP front-facing camera, a 2MP selfie camera, and a 4.5-inch screen.

Just from looking at these specs and the sticker price, it is safe to say that Samsung will have to work much harder at providing value to its lower-end customers if it wants to both make Tizen a bona fide substitute to Android and come close to achieving the phenomenal success it did with its higher-end Galaxy line of phones in the country. This is a market, by the way, where Chinese phone maker Xiaomi, which recently caused a sensation in India with its value-added phones (and which has replaced Samsung as the number one selling phone in China) has only just begun warming up in the country.

However, if Samsung does manage to trot out a truly competitive phone, considering its fantastic reputation, brand recall, and loyal fan base, it could rule the India smartphone market on both the upper and lower ends. But right now, that's a big "if".