DataWind CEO shares secrets of cost-cutting tablet manufacturing

Montreal tech firm reveals secrets of building the world’s cheapest tablet

Four hundred thousand, that was the number of units pre-ordered in October last year by people eager to get their hands on the commercial version of the Aakash Tablet, the world’s cheapest tablet device, slated for release this month by Montreal-based tech upstart DataWind Inc.

The government of India is expected to order up to 2 million units of the Aakash, which the government intends to sell to Indian students at the subsidized price of about $35.

The Android 2.2 powered, 7-inch touchscreen tablet created a global stir when it was announced late in 2011 that the device would sell for a mere $35. Its commercial version, the Ubislate 7, runs on the more current Android OS 2.3 and comes with amenities such as HD video playback, faster WiFi connectivity, and phone features. It will retail for about $60 – still $139 cheaper than the Kindle Fire.

Online pre-orders for both devices has been so massive that DataWind’s Web site crashed and still has some technical issues today.

“Response to the products in the last few months has been fantastic and overwhelming,” said Suneet Singh Tuli, the 43-year-old CEO of DataWind. “Back in July last year, even I myself wrote a blog saying that a $35-tablet is impossible to build.”

Today DataWind is able to manufacture the Aakash at prices below $35/unit, he says. The Indian government buys the tablet from the company for $49.98 and resells it for the subsidized cost of $35/unit.

The quest for the ultra cheap tablet began in early 2011 when the Indian government put out a tender for a nationally subsidized tablet for the masses that would also help the government provide Internet access to its citizens (only 10 per cent of Indians have Web access).

DataWind, with offices in Montreal; Mississauga, Ont.; London, UK; and Amritsar, India, beat out a handful of other companies that bid for the contract.

Tuli, relates how he, his older brother Raja (DataWind’s chief technology officer) and a multi-cultural team of Canadians and immigrant technicians at the DataWind office in Montreal managed the feat, which many including their bid competitors thought was impossible.

DataWind’s winning strategy could be instructive of how other small and medium sized businesses engaged in other markets can hit pay dirt in an otherwise crowded arena, according to Tuli who also happens to live in Toronto.

Here are Tuli’s tips:

Sell to the masses

Sell to masses, live with the classes. In Canada that line has been associated with Ed Mirvish. However this is also the winning strategy of DataWind.

While device makers such as Apple, Sony, Samsung, HP and RIM go after the mid to high level income consumers, companies like DataWind target the lower income bracket in markets like China, Asia, India, with low-cost gadgets.

Founded in 2000 by the Tuli brothers, the company has had reasonable success in making and selling low-cost wireless gadgets such as PocketSurfer (a clamshell web-enabled mobile device) and the mini netbook UbiSurfer in the U.K.

For entrepreneurs like Suneet, who focus on low-cost digital products for the disenfranchised, markets like India (and China, Asia, Africa and Latin America) are what’s referred to as the “next billion.”

The idea is to make more money through selling low margin devices to a greater number of people, said Tuli. “Why chase after the next million buyers when the next billion is just waiting to be served?”

Not in my backyard

NIMBY is often used pejoratively. But many Canadian tech startups have had to adopt a sort of reversed version of NIMBY in order to thrive. Many Canadian SMBs found it necessary to take a global approach to help their business prosper.

“Look at the global market, don’t focus on your own backyard,” advices Tuli. In his case, Tuli lives in Toronto, DataWind has a research and development office in Montreal, and sold most of its earlier products in the U.K.

Parlaying the Tulis’ knowledge of India’s mobile market and other local business connections enabled DataWind to secure the Indian government contract.

Recently, Tuli has been fielding inquiries from officials of other countries interested in the bargain basement tablet. The list includes the minister of information and communications for Thailand, who wants 10 million tablets, and officials from Turkey, Sri Lanka, Trinidad, Tobago, Egypt and Panama.

Follow the money trail

DataWind also took noticed of global investing trends. The company has its headquarters in Montreal but is actually registered in the U.K. This is mainly because most of DataWind’s investors come from across the pond.

“For some reason the investor community in the U.K. is more proactive. Canadian investors tend to be more conservative,” according to Tuli.

Cut production margins

DataWind is able to profitably manufacture the Aakash and Ubislate 7 because the company managed to squeeze out the smallest margin from its components.

Tuli says they are able to do this by sourcing components from various manufacturers that offer the best price for the specs they need rather than sticking with a single manufacturer.

This enables DataWind to realize deep discounts on key components. For instance, Tuli explains, many tablet markets spend anywhere from $15 to $20/unit on their LCD screens. DataWind was able to cut down the price to $8/unit because the Montreal firm purchases uncompleted units. “We do the rest of the gluing and soldering needed to finish the job,” says Tuli.

Touchscreen panels can cost more than $20 per unit but DataWind was also able to source much cheaper panels from another Montreal firm.

DataWind also opted for the free Android operating system and tweaked it to work on its devices’ cheaper but weaker processors (Arm 11 – 366 MHz microprocessors in the case of Aakash).

DataWind further cuts production cost by manufacturing its devices outside Canada. “The Aakash is manufactured in India not only because of the lower labour cost, proximity to the market and because the device would be the pride of India,” according to Tuli.

In his talks with other countries, Tuli is pushing for a similar local manufacturing model.

Nestor Arellano is a Senior Writer at ITBusiness.ca. Follow him on Twitter, read his blog, and join the IT Business Facebook Page.