Critics of Project Ara have long been skeptical of Google's modular smartphone efforts, but the development team working on the project is steadily making progress.

On Wednesday, the Project Ara team took to YouTube to demonstrate a fully working prototype of the first modular smartphone. Dubbed Spiral 1, the device runs on Jelly Bean, an older version of Android, and has five removable modules: a battery, an application processor, a LED module, loud speakers and a USB port for charging.

The video demonstrates how the team at Google contractor NK Labs put together the Spiral 1. The process, an NK Labs engineer says, starts with identifying the functions of the different parts and drawing the schematics of the system. Once the layout is complete, the boards are fabricated and go through a smoke test.

"Once the board passes the smoke test, then you spend time in the lab testing all the functions of it, making sure that it does what you expect," says NK Labs. "And then once we have that, once we have the individual pieces working, then we put them together into the complete system."

As seen on the video, the device has no problems booting and is fully operational. Earlier this year, Google demonstrated a modular phone prototype that was, unfortunately, unable to boot with no lags and crashes. The Spiral 1, which was developed by the Boston-based, seven-man company, works perfectly fine, at least as the video shows.

However, the NK Labs engineer demonstrating the Spiral 1 says the team has used up around 50 percent of the entire space for modularity, which means not much room is left for incorporating powerful components. The Project Ara team is still a long way off from incorporating parts such as NFC or fingerprint sensors, but NK Labs says it is already working on a second prototype that will open up more space for developers to customize the hardware, with custom-made chips from Toshiba.

Spiral 2, however, will not be unveiled until Google's next Project Ara developer conference scheduled for Jan. 14, 2015, where developers can attend the live event at Mountain View or view from satellite sites at Google's offices in New York City, London and Buenos Aires. Google will also hold a separate developer conference in Singapore on Jan. 21, 2015, with satellite viewing from Tokyo, Taipei, Shanghai and Bangalore.

Project Ara is not an official Google product, nor is it an Android or Nexus phone. It is still in its infancy stage and a development effort at this point. The Project Ara team estimates that it will be able to release a pilot product in a price range of $50 to $100 by the end of next year.

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