DataWind faces uphill climb in India's smartphone market

DataWind's recently launched smartphones could usher a new era of connectivity in India--but not if it garners the kind of reputation the hardware maker's erstwhile Aakash tablet did.
Written by Rajiv Rao, Contributing Writer on

DataWind could usher a new era of connectivity in India with its recently launched smartphones, but it will first need to shake off the bad rep its Aakash tablet generated.

DataWind smartphones
DataWind has its work cut out for it, if it hopes to dominate India's smartphone market.

The Indian tablet and cell phone manufacturer recently launched three potentially revolutionary smartphones in one of the world's hottest consumer electronics markets. Its PocketSurfer smartphones range from around US$55 to US$105 and are outfitted with 5-inch screens, which generally are not available at those price points in India. The devices come with Linux and Android platforms.

It's easy to see why this could turn out to be such an important development. After all, the Indian market has exhibited an insatiable appetite for smartphones, growing at a sizzling 250 percent annual growth rate and primarily in the medium-low price range that caters to notoriously price-sensitive Indian consumers.

Moreover, most phones in this category generally are not as generously equipped with the kind of screens and up-to-date OSes that DataWind's devices are. In other words, if the company plays its cards right, it could become a giant in this segment, out-muscling stalwarts like Samsung and Micromax

But there lies the rub. DataWind is a company that, in India, has more often been synonymous for disappointment or disaster, depending on whom you ask. Its name is inextricably entwined with the low-cost US$$35 (subsidized from its US$65 retail pricetag) Aakash 1 tablet, a massive project led by the Indian government for distribution to rural school-going children. The initiative was initially destined to become another product that would alter the way we communicate and live, much like the now-infamous Nano small car designed by Tata Motors.

The Aakash tender was awarded to DataWind, which is a British and Canadian outfit, but was somehow dubbed Indian--perhaps because it was founded by Sikh brothers Suneet and Raja Tuli, both of whom grew up in Canada's Northern Alberta province and thereafter established their base in Montreal.

The first two versions of the low-cost tablets DataWind produced turned out to be "poorly made, poorly assembled, and cumbersome to use, testing a user's patience", according to an entertaining takedown by Fast Company that tried to unearth the story behind the product's failure.

The manufacturer, for its part, said the government kept changing its specifications and pointed to "significant efforts made by some" to derail the project through "nonsensical made-up controversies".

Whichever side of the Aakash controversy you may find yourself on, the fact is DataWind commanded 12.5 percent of tablet sales in the second quarter of 2013, behind Samsung's 21.2 percent, and ahead of Micromax's 9.7 percent. This is an impressive feat, although analysts say a further look at the country's tablet sales this year shows an unusually volatile landscape, with leading players frequently knocked off their ascendant perches from quarter to quarter. In the September-ending quarter, Lenovo pushed DataWind to the number three spot with 13.4 percent share versus 12.4 percent.

So what should we make of Datawind's new smartphones? While the devices have some very attractive features, players in this market are constantly upping the ante on form factors and price points, especially indigenous stalwarts like Micromax and Lava.

The real challenge, analysts say, is to crack the retail and telco distribution game through savvy tieups--without which Datawind will be unable to get the kind of volumes it needs to justify its price points. Then, there are other areas such as after-sales service, which phone users in this space are increasingly particular about.

In other words, DataWind has its work cut out for it, if it hopes to dominate India's smartphone market in the years ahead.

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