Firefox OS – Who pays the piper?

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Firefox enables a $25 smartphone but it is hard to see how anyone makes money from it.

  • For the last year Firefox OS has promised mid to high level smartphone performance for a mid to high level feature phone price.
  • It got the price right but the performance really lagged which combined with spotty operator commitment meant that volumes meaningfully disappointed.
  • Radio Free Mobile has forecasted that Firefox shipped around 1.3m devices during 2013 but only 425,000 unique users have actually visited the Firefox marketplace since the devices went live in July 2013.
  • This strongly implies that there are less than half a million users in the ecosystem compared to my estimate of 1.2m.
  • I think that this is largely due to spotty operator commitment where refusal to commit to certain volumes has meant that entire programs have been cancelled.
  • The launch of the Huawei (Firefox OS) and ZTE (Open C) phones are big upgrades to what has gone before but are still unlikely to effectively compete against Android at the same price tier.
  • However, Firefox has taken the bull by the horns and the latest version of its OS enables a $25 smartphone.
  • At the heart of this design is the SC6821 from Spreadtrum which offers Cortex A5 @ 1Ghz, 1GB embedded DRAM and 2GB of external NAND flash.
  • The reference design includes a 3.5inch HVGA screen, 0.3MP camera, 2G EDGE, WiFi, Bluetooth and FM radio.
  • This is not exactly exciting in the smartphone world but at $25, this measures up impressively against budget feature phones in this price tier.
  • The lack of 3G removes a lot of cost as does the external 2GB memory that the user will have to purchase on top of the price of the device.
  • It is clear that massive compromises have been made to hit this price point, but it still stacks up very well against other feature phones in its price range.
  • So the vital promise (see here) now becomes: Mid to high feature phone performance at a very low feature phone price.
  • Essentially, Firefox is attempting to get in underneath the lowest end of Android, the falling price of which made its 2013 offering obsolete before it even launched.
  • If this promise can be met and the operators can be made to commit to big volumes then Firefox could see some meaningful traction and take up of its ecosystem.
  • However, one big problem remains. I can’t see any takers for this reference design.
  • This is because it is so low priced that it will be extremely difficult to any OEM to make even the thinnest of margin without massive volumes.
  • While the operators might be convinced to commit to more volumes than before, I doubt they will commit in anything like the size needed for an OEM to have the confidence to make the devices.
  • This is exactly what killed the GSMA’s “3G for all” program in 2007 where LG could not secure commitments from operators for the KU250 to be able to make a decent return on the device.
  • It seems that history will once again repeat itself and unless operators can be made to really step up, this device will not make it off slideware. 
  • The promise has changed but the game remains pretty much the same.
  • Firefox has a promise to keep to see some real traction and there is a huge hill to climb to get there.
  • That being said, if operators are prepared for once to live up to their protestations of support then this promise might just be kept.
  • This is more likely to happen than before and so I think the chances for Firefox have improved somewhat compared to where it was last year.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.