Stan Honda/Agence France-Presse - Getty ImagesSuneet Singh Tuli.Suneet Singh Tuli, the chief executive of DataWind, the company behind the $40 Aakash tablet, spoke to The New York Times in New York on Nov. 29, a day after the world's cheapest computer was unveiled by Ban Ki-moon, the United Nations secretary general, at the United Nations headquarters. Â
The project, spearheaded by the Indian government, has encountered some setbacks. Mr. Tuli's company will miss its first deadline of Dec. 31 to deliver an order of 100,000 tablets, meant for colleg e and graduate school students, to the Indian Institute of Technology Bombay, the engineering institution in charge of the Aakash project. Datawind has delivered only about 14,000 tablets so far, and it recently received an extension until March 31 to supply the remaining tablets.
The 44-year-old Mr. Tuli, who pledged to make the tablet in India, talked about the difficulties in keeping up with the scale of the project and how his company can beat the prices of Chinese manufacturers in the tablet market. He also addressed recent news that Datawind shipped a batch of 10,000 tablets from China.
Here is an edited transcript of the conversation:
You had to ship 100,000 tablets to the government of India by Dec. 31. Are you on track to meet that deadline?
No. Look , the project is not going to die if all 100,000 will not be there by the end of December. If we miss it by some quantity, they [the government] will decide how much they want. Their next stage in this project is five million units. Their target is to do 220 million units over five or six years to make sure every student in that country has a computing Internet device.
They are going to put out tenders, similar to what they did here. They put out a 100,000-unit tender, we won that tender and we are supplying that product.
There is version one and version two, and lots of muck in between. But they have held steadfast to the belief that they want a low-cost device and that they will bring their financial muscle to the table to procure and get pricing down to the level they want.
You got a warning note from the I.I.T. Bombay about the Dec. 31 delivery deadline. What are you doing about it?
We are do ing the best we can.
What do you think realistically is the number you can deliver to them?
I will have to see. This is not a sort of cliff that the project stops. Yes, they want it done as fast as possible. The ramifications of it should not be blown out of proportion. It is an artificial number, not relevant to the contract or terms of agreement or anything else. They wanted the 20,000 by the time they did the launch. Unfortunately, we were able to deliver only 12 or 13 [thousand].
One can jump up and down and get upset and say, “Oh, my God, they had to do 20 and they did only 13. These got kitted in China, oh, my God.â€
It doesn't impact the reality on the ground. We are proud that these concepts started in India and they are going to use it to educate their kids. And we are adding as much Indian value-add as we reasonably can.
Except we are the only one in that whole realm who is pus hing for a made-in-India product. It is not a government requirement that it be a made-in-India product. Instead, it's something we have requested the government to specify in future tenders. They should specify an Indian value-addâ€"at least 25 percent is made in India, or at least 30 percent. That wasn't part of the specs and still is not.
The government's response to the recent three days' worth of brouhaha is: We placed an order on a vendor to supply a product - beyond that we don't care.
How are you able to make the product so cheaply?
When you look at our bill of materials, we work at very low margins. No one else is in the industry is doing that. We have openly said what our business model is, focus on the recurring revenue stream: content, apps and so on. We are after a price-sensitive consumer, and to get to that we forgo most of our hardware margins.
It takes the Chinese supplier $42.85 to make it. I am telling you that I have a 5 percent margin and I make it for under $38, including the transportation, a 12-month warranty and the rest of it.
How is this possible?
The only money left in this for us is the LCD and touchscreen. We make the touchscreen in Canada, and the LCD is packaged for us in South Korea. That's the margins we squeeze.
We tweak the reference design that is used in the industry for power management that's better for usâ€" we can use this chip that's cheaper and that chip that's cheaper and it meets our requirement, and we save a $1 or $1.50 in that area.
We make the touchscreen for $2. The Chinese also make it for $2 and sell it for $10.
Instead of us bringing 800 parts from 60 vendors, and doing the boards [motherboards] in India - which is what we did for the Aakash-1 and the Aakash-1.5 - for the sake of expediency for Aakash-2, getting those through lo gistics in India takes a lot of efforts. In China, they do the boards for 30-cent margins. I reduced the whole thing down to 12 parts and I kit it.
I told them, “I don't want you to assemble these.†I told them, “Some of these are going to the Indian government. For those, I want you to put them in a kit form in a box and I am going to bring it in that manner and process it. Later on, I will do more of it.†Contractually, legally, morally, it has no implication.
I am setting up a fab [fabrication unit] for making touch panels in Amritsar, India's first fab. Except for the fact that I am the one who has been wrapping myself around the Indian flag and saying this should be done, no one is asking for it. The government is not asking for it; the consumer is not saying, “I will only buy a made-in-India product.â€
You talked up about setting up a fabrication unit - that's a large investment. What is the cost?
Huge! Under 10 million [dollars]. It will make touchscreens. What we do with LCDs - we have guys in South Korea to package it for us. Â They come in and do what they need to do and it goes in. We save $3 here. We maintain ourselves a 5 percent margin.
How are you able to finance this? There must be a lot of upfront cost.
There are two aspects to it, the consumer side of it and the government side of it. When we did this originally, the government was trying to get a sub-$50 product. They put out two sets of tenders, then canceled those, but couldn't get a sub-$50 product. After setting standards for eligibility criteria that would only get the multinationals in, they said the multinationals are not willing to bid. So, they said, “Why don't we go out and put a tender where we reduce the criteria and say the company only had to be $5 million in revenue.â€
All these little companies like us said this is an opportunity for us. We bid; we were significantly lower than the next guy.
On the government side, they give a letter of credit that gets transferred to factories and so on - that's how it gets funded.
When the publicity started, we put out a form for selling the commercial product online. In April-end, when we launched commercially, we had three million pre-bookings. Now we are at little over four million units. We said we'll deliver against whenever the product is ready. We are getting 600 to 1,000 pre-bookings every day. We deliver 2,500 to 3,000 a day, and we are still trying to catch up.
In the middle of that, we thought, if there are consumers that want to pay and are willing to pay, let's do that. Some started paying. Unfortunately, the scale of everything here has been beyond our imagination. In India, setting up an e-commerce facility takes time, so we thought we would have people sending us checks. Big mistake!
The po st office calls us up three, four days later. They said, “You have four boxes of checks.†Then we stopped it. We prioritize orders as they come in. We deal with our pre-bookings. We deliver them.
Some get extra upset that they weren't delivering on time. We offer refunds for those who don't want to wait. They will get a world-class product, I think, at a fraction of the price they would get otherwise.
What is your manufacturing experience like? Most of your team hasn't had experience making  tablets. Does that make it kind of challenging?
What's given you the impression that our team doesn't have experience? Â Let me explain our team: my brother alone has 78 patents. In the last 22 years, we have launched over 20 new electronic products. We were making the equivalent of a tablet with a 5-inch screen in 2002. For 10 years, we've been making devices in and around the tablet. We have made a series of netbooks and so on. Look up the product called PocketSurfer and see how far that goes.
Android tablets we may have been doing for only 18 months. We have experience making it. I challenge you to find somebody outside Samsung and LG, the large companies, in the same ballpark with the same depth of expertise that we do. Find me a guy who has a touchscreen facility and is making tablets on their own. The only one who is doing it is Samsung. None of my competitors in India do, Amazon doesn't, Apple doesn't.
What do you think India needs to do to improve its manufacturing of electronics?
Reduce bureaucracy. Get some pride in what they do. India is a country where garment stores have a sign that says “export qualityâ€â€"in every other country in the world that would be insulting. If foreigners need to buy it, it has to be good quality. Export quality is a sales pitch in India.  For them to make it in In dia, there should be an incentive for them to make it in India. If nothing else, local pride that it's made in India.
What have been the biggest hurdles with shipping the tablets to the government? Â What would you have done differently in retrospect?
It is a politically charged project that people take glee in demeaning. I don't know in the last 18 months what I could have done differently. The first contract stalled when I delivered 7,000 units and they said it couldn't sustain four inches of rain. Until today I haven't gotten paid.
I am creating a product at a lower price than anyone else in the world with the hope that it impacts people's lives and I make money out of it. I am not a charity. Nobody else in world is able to do it. I am getting crucified because they got kitted there [in China]. You know whatâ€"the brouhaha will be over in 48 hours and we will keep delivering the product.
At such low costs and low margins, are you running into any quality issues?
Forty-dollar devices are not going to have Apple quality in there. Â The Apple customer insists on a certain level of quality. To us, cost matters most than the balance.
