Google to scale up its Pixel smartphone business in India amid a booming premium market

Google's Rick Osterloh said India is a priority market for Pixel smartphones

Google plans to scale up its Pixel smartphone business in India, a top executive said, as the tech giant looks to capitalise on the rising demand for premium smartphones among consumers in the world's second-largest smartphone market.

"The growth of India's premium smartphone market from being the eighth largest premium market to become the third within one year is remarkable, so it's undeniable how important (India) is for us" said Rick Osterloh, senior vice president for devices and services at Google in a media roundtable on the sidelines of the company's annual 'Google for India' event on October 19.

Osterloh, a former president of smartphone maker Motorola, said he has been involved in the early days of the India smartphone market (with Android and Motorola devices) and that no market in the world has changed as much.

Coupled with the rising adoption of artificial intelligence (AI) services among Indian consumers, Osterloh believes that the country is ready for the "world's first AI mobile computer" with the Pixel lineup of smartphones.

On October 19, Google announced its intentions to locally manufacture Pixel smartphones in India, starting with Pixel 8 and Pixel 8 Pro, with the first devices expected to roll out in 2024. The company said this initiative will help them make smartphones more widely available across the country.

Osterloh mentioned that India is a priority market for Pixel smartphones "This announcement indicates how serious we are about being a significant player in this market and its future growth" he said.

The firm is in discussions with both domestic and international manufacturers for local production, with more details expected to be shared in the coming months, said Ana Corrales, chief operating officer for Google's devices and services business during the roundtable.

Pixel's India market share

To be sure, Google currently has a miniscule market share in India's premium smartphone market. Including all Pixel devices, the company had 1 percent share in India's premium smartphone segment in H1 2023, said Tarun Pathak, research director at Counterpoint, a market research firm.

That said, Google Pixel shipments in India grew by 88 percent year-on-year (YoY) in 2022 and are expected to grow by 30 percent YoY in 2023, he said.

According to Counterpoint, shipments in India's premium smartphone segment (above Rs 30,000) grew by 112 percent YoY in the second quarter of 2023 and now account for 17 percent of the country's overall shipments. Samsung leads the premium market with a 34 percent share followed by Apple.

The iPhone maker however continues to dominate the ultra-premium segment (above Rs 45,000), where Google's Pixel phones also compete, with a 59 percent market share.

Over the past year, Apple has been aggressively ramping up local production of its flagship iPhone devices in India for domestic use and exports, in a bid to diversify its manufacturing capabilities beyond China.

Read: Ecosystem, not price play: Why the made in India iPhone costs an arm and a leg in India

Better pricing for Pixel smartphones?

By locally manufacturing Pixel in India, Google will be able to reduce its import duties and improve the smartphone's cost competitiveness, Pathak said.

"This will allow the brand to roll out more offers and make the Pixel devices more affordable for Indian consumers, which in turn will boost its market share in India" he said.

Echoing a similar sentiment, Navkendar Singh, associate vice president at IDC India, said this announcement could result in Google offering a slightly better pricing for the upcoming Pixel range of smartphones in India.

At present, Google's Pixel 8 and Pixel 8 Pro smartphones are significantly more expensive in India than in the United States. The Pixel 8 costs Rs 75,999 in India, while the Pixel 8 Pro costs Rs 106,999. In comparison, the Pixel 8 costs $699 and the Pixel 8 Pro costs $999 in the United States.

However, Singh also noted that Pixel is still some time away from challenging Samsung or Apple at the premium end. "It needs to invest heavily in marketing, distribution, and service support. All these are important factors in building a trust on the brand in consumers mind" he said.

Google, in partnership with F1 Info Solutions, has 28 service centers in 27 cities across India at present, and the company said it plans to expand coverage to more locations and cities in the months ahead.

Nanda Ramachandran, vice president of Google's mobile business, also said that they are now in the "scaling phase in India in terms of sales and marketing". The tech giant, which currently sells Pixel smartphones only on e-commerce marketplace Flipkart, plans to gradually make them available through other retail channels in a phased manner, he said.

Read: Generative AI helping us reimagine Search, other products: Alphabet's Sundar Pichai

May export made-in-India Pixel devices

Google plans to initially focus on using locally-made Pixel smartphones to meet the growing demand in the country, however, they may explore exporting it to other markets in the future, Osterloh said. He added that this move will also help them further diversify their manufacturing footprint.

The company will also continue to invest in expanding its hardware engineering presence in the country.

"We have a significant (engineering) operation in Bengaluru with people working on many aspects of our product development. A very significant portion of it is working on the Tensor (chip), which is core to our product strategy. We find the engineering talent here to be world class and we will continue to hire and grow our team" he said.

Google Pixel 8 Pro, which was unveiled a fortnight ago, is the first phone to run the company's foundation AI models directly on the device. This would lead to enhanced AI experiences for users buying the smartphone, such as an improved Magic Eraser feature, smart replies on Gboard keyboard app, summaries in the recorder app and a Zoom Enhance that allows people to refocus pictures they have taken among others.

"At the moment, it is very early in the development of that technology but I think the possibilities are significant," Osterloh said.

He believes that the entire future of computing will be driven by AI and in particular, generative AI.

"We're excited about the possibilities that AI opens up for consumers. We will be able to unleash a lot of innovation, so that users can get all sorts of new capabilities on their phones. We are the new, small entrant into the phone space...we hope to be able to shake (the smartphone industry) up a little with AI innovation" Osterloh said.