Analysts predict RIL’s subsidy cost on JioPhone Next rising amid delay in launch

• Follow

Even as the launch of JioPhone Next is delayed amid the global shortage of semiconductor, Reliance Industries Ltd (RIL) may have to bear an additional cost of Rs 18,750 crore overall to subsidise the 75 million units of the smartphone that it aims to sell at price point of Rs 4,000, according to a media report.

“We reckon if RIL prices the JioPhone Next smartphone at around Rs 4,000 and looks to sell 75 million units, the subsidy element per handset could rise to around Rs 2,500, or Rs 18,750 crore overall…This is due to a near 20% rise in component prices, particularly memory and LTE (4G) chipset costs, coupled with procurement delays and continuing global semiconductor shortage,” the Economic Times quoted an analyst at a leading brokerage as saying in its report.

Co-developed by Google and Reliance Jio, JioPhone Next is termed as the ultra-affordable smartphone. There is no official word on the price of the smartphone yet.

Earlier in June, IIFL Securities had estimated that RIL may have to spend around Rs 15,000 crore if it aims to sell 75 million units, with nearly Rs 2,000 subsidy apiece, according to the Economic Times.

UBS had claimed that even if Google and Jio were to develop a lighter operating system, the cost reduction would be possible only in few areas such as display (around $5) and memory (around $4), which would make a $50 bill of materials (BOM), or cost of the device, tough to achieve, the news report said.

Jio is believed to be targeting a 500 million user base, aiming to snatch away a chunk of Bharti Airtel and Vodafone Idea’s 300 million 2G feature phone user base, according to the report.

Reliance Industries (RIL) may also explore the ‘Buy Now Pay Later’ (BNPL) scheme. Jio may give the option to its customers to pay a low upfront amount and pay the balance in easy multiple instalments. But consumers may have to wait a bit more before the launch date of the phone is finalised.

More delay expected

Reliance Jio had in June announced the launch of its JioPhone Next on Ganesh Chaturthi (September 10), but the release date has now been postponed to a date earlier than Diwali (November 4).

Many experts believe that the delay in the launch of the smartphone is due to the global semiconductor shortage and supply-chain delays, and claim that the launch of the smartphone could further be pushed beyond Diwali.