Firefox India – Double edged sword.

Unconformity to the design ensures losses.

• Mozilla has announced that Intex, the Indian handset maker, has launched a Firefox powered device called Cloud FX Phone that will go on sale for $33.
• Later this week, a second device manufactured by Spice Mobility will be launched for the price of $38.
• Both of these devices look like they are based on the $25 smartphone reference design that was launched at MWC this year.
• My view on this platform remains unchanged (see here) in that I believe that the project needs to ship 10m units of the design with no modifications in order to break even.
• Unfortunately, I see evidence that the same problem that killed the “3G for all” program in 2007 occurring yet again.
• In 2007 the winner of that contract (LGE) needed to accumulate more than 6m of orders of its reference SKU in order to ship enough units to break even.
• Unfortunately, every customer wanted something different meaning that LG would end up spending a fortune customising all the variants and consequently lose money on the overall project.
• Consequently the project was quietly put to sleep.
• The same thing appears to be happening again as the Cloud FX phone and the Spice Mobility devices look like they are only loosely based on the standard $25 reference design.
• The specification of the Cloud FX Phone and its price indicate that Intex has tinkered with the specification to make its own version of the device.
• While this is not an issue per se, it means that Intex will have incurred further costs to make its desired variations.
• This is clear in that the device has a 2MP camera while the reference design uses 0.3MP and it has 128MB of RAM while the reference has 1GB of embedded DRAM.
• The fact that the Spice Mobility device will sell for $38 implies that, it too, has made modifications to the standard design.
• The beauty of the reference design is that someone else has done the integration and testing already meaning that all the vendor has to do is put it together.
• This ensures a meaningfully lower development cost and greater economies of scale if parts can all be sourced together.
• This is critical to enabling a handset maker to be able to break-even at a very low price.
• In this instance the reference design is controlled by Spreadtrum who was also tasked with buying all the parts in bulk so that everyone could benefit from lower prices.
• However, it looks like each manufacturer is going it alone which essentially ensures that the $25 price will be missed and everyone will lose money even at the higher price points.
• Furthermore, The Firefox ecosystem is very short on third party apps.
• So much so that WhatsApp connectivity has to be provided by a third party app. on these devices.
• Consequently, these manufacturers are not going to benefit from the scale effect that is so desperately needed to make this project fly.
• I will be surprised if these two devices ship 1m each leaving the project short of 8m devices in the best instance even if everyone was sticking to the script.
• Consequently, I see no way for this project to make money and continue to remain extremely cautious concerning the outlook for the Firefox ecosystem.