India's $4 smartphone is too good to be true

There's mounting evidence it's actually a scam.

Last week, we heard a company in India was selling a smartphone for an astounding $4, which seems a little too good to be true. It turns out that it probably is. After selling nearly 30,000 units, the company is now being accused of fraud by congressman Pramod Tiwari. Another MP, Kirit Somaiya, has called it a huge Ponzi scam and requested a government investigation. These are only the latest roadblocks for a phone mired in controversy. From a shoddy prototype that was actually another company's phone to a recent government raid, it's beginning to look like a $4 smartphone is less a reality and more like a scam.

The phone was the Freedom 251 and the company behind it is a little known outfit called Ringing Bells. When it first launched, the specs seemed pretty decent considering its low price point: A 1.3 GHz quad-core processor, 1,450 mAh battery, 4-inch 960 x 540 qHD display, 1GB of RAM, 8GB of internal storage and a 3.2-megapixel camera. Sure it's not exactly flagship material, but at 251 rupees (which amounts to about $3.67), that's not just a steal -- it's downright criminal.

And, it seems, potentially impossible.

Pankaj Mohindroo, the founder and president of the Indian Cellular Association, has told CNN that the whole thing seems to be a joke or a scam. Even when using the cheapest components, he said, a phone like the Freedom 251 would cost at least 2700 rupees or $40 to make. Wing Lam, an analyst for IHS iSuppli, told us that even for very low-end phones, a 3.5-inch touch screen alone would cost more than $4 to manufacture.

Image credit: Vishal Mathur, Android Authority

That's suspicious enough, but there's more. At a launch event for the phone, the company gave away what looked to be samples of the handset in question. But it was actually units of a Chinese phone called the Adcom Ikon 4 with its branding spackled over with Wite-out. Not only that, but the phone given out looked completely different from the render on the company's website (the image has since been altered to match the phone).

Ringing Bells said that the aforementioned giveaway handset was just to give people a rough idea of what the phone would look like. Mohit Goel and Ashok Chanda, both founders of Ringing Bells, tell the Times of India that the devices had Adcom branding because they sourced the screen from them:

"We just wanted to show a prototype of what the handsets will look like. This is not the final piece. We obviously want to provide 'Made in India' handsets as that is the core of our vision. We did a quick and intensive search and located the components but due to the touch plate, we faced a problem in view of the fragile nature in addition to the scratch-proof requirements of the piece."

But that's not all. Ringing Bells has also come under scrutiny by the country's income tax department for marketing a device without having a Bureau of Indian Standards certification. The government has even raided a company office and started investigating the firm's credentials and documents.

One of the reasons it needs the money for the pre-order, or so it seems, is to actually start making the phones in the first place. Apparently the company still doesn't have a factory. That's highly surprising considering that the company promised to ship a phone by June.

"We don't have the manufacturing unit yet, so of course we can't start making these fully in India right now ... We will be importing the parts right now, but we will assemble fully in India, and in six to eight months, we will be in a position to start making fully in India," said a Ringing Bells spokesperson to Android Authority. A Wall Street Journal article, on the other hand, reports that building a factory in India would take at least a year.

A point of pride for Ringing Bells was that the phones would be part of the Make in India program, which is a government-run initiative to encourage companies to build their products in India. A press release by Freeme OS -- the Android overlay that the company is using -- states: "Thanks to Make in India organized by the Indian government, Freedom 251 launched by Ringing Bells, is highly supported by Prime Minister Modi and is subsidized from the government."

But even this is apparently false. Ringing Bells has stated publicly that it plans to make its phones in India without any government subsidies. The government confirms this and tells the Economic Times of India that it has nothing to do with the project either. None, zip, nada. Well, that's not confusing or anything.

With so many conflicting reports and factual inconsistencies, it's difficult to disagree with the Indian congressman who said that this is "the biggest scam of the millennium." Ringing Bells has now currently stopped taking orders and is supposedly working on getting the phones made. We've reached out to the company to get confirmation. Until then, we'll have to see if that actually happens.