Yesterday, Nothing announced that its next Nothing Phone (1) would not be released in the United States. There were a lot of people in the tech community who were outraged that Nothing had been marketing so much of their device in the United States to turn it around and ignore it on its first major release. While it may seem like a betrayal or Nothing ignores millions of tech enthusiasts in the US, it makes sense not to throw the phone (1) here. Let me explain.
Brand loyalty is a massive deal
Look, brand loyalty is one of the best sellers of products in the world, both inside and outside of technology. In 2019, 90.2% of consumers said they were loyal to a brand, this is especially true when it comes to the technology market in the US. It is more than likely that customers using products from Samsung, Apple and Google will continue to buy from this company, and it is very difficult to break this loyalty. Most of this is out of the control of Nothing. Even if they did, the cost of customer acquisition (CAC) would probably be incredibly high, so it wouldn’t be worth the marketing dollars invested in it.
Even looking at Nothing technically, the phone (1) offers no significant new features or specifications to make it worth changing for a consumer. This is a $ 500 phone with a mid-range processor with a mid-screen, dual cameras and a boring design, out of the LEDs on the back that will only be covered by a case. The device doesn’t offer anything that creates FOMO (fear of getting lost) to customers, nor any features that take it out of a current ecosystem and probably already heavily invested. Brand loyalty from Samsung, Apple and Google is too strong and Nothing offers, well, nothing.
Nothing can compete with Google, Samsung and Apple without operators
There’s no room for operators for the Nothing Phone (1) right now – it’s another $ 500 phone that doesn’t really bring to the table out of an unusual design. There are many better phones in this price range in the US market that operators already sell from much larger players. Nothing could afford or manage the sales representatives of the carrier stores on the scale of Apple, Samsung or Google to train the store’s employees.
You may be wondering why I focus specifically on operators. Well, it’s because that’s what makes up the US market.
According to the NPD Connected Intelligence research group, there were 50.1 million active unlocked smartphones used in the U.S. by 2020. That number of phones is only 17% of the 294.15 million smartphones. total assets in the US. It doesn’t make sense to focus on the minority who are probably unwilling to buy a device, because contracts and payment plans don’t oblige them.
These other 244 million devices would be blocked and sold through operators, probably with payment plans that subsidize device costs. This allows for great financing deals that keep you in the carrier and on your device, but also allows you to split the price of a $ 1,000 phone into $ 24 a month payments for 36 months with a $ 150 down payment, the term now standard for financing an American operator. agreement. With the average selling price of a 5G phone in the United States recently at $ 815, it looks like a $ 500 phone doesn’t fit the market.
A $ 300 phone that can be given away as a promotion with a change or a new line would go well with operators, as well as a $ 1,000 phone that can be funded. A $ 500 funding plan doesn’t make as much sense when the difference between that and $ 1,000 funding is about $ 10 a month (since $ 500 phones won’t normally have an upfront payment).
Meanwhile, spending $ 500 in cash also doesn’t make sense when the Pixel 6, a well-marketed device with a better-than-brand camera and processor, is $ 600 and probably has a discount outside of the operator’s grant. The Nothing Phone (1) is a phone without a place in a market that is probably not willing to accept it.
Ignoring the operators, if Nothing wanted to sell its unlocked device and offer its own financing to sell the phone (1) through its website, it would have to find a bank that was willing to manage the financing. Banks like TD Bank are the ones that manage the financing of companies like Samsung in Samsung’s financing plans, not Samsung’s own. In an unstable market, banks are likely unwilling to work with startups to fund consumer devices like this. Without the operators subsidizing the phone, it is unlikely that Nothing would have mass sales.
To reach the U.S. market in a meaningful way, Nothing would need either a single flagship or a very cheap device on an American carrier. The Nothing Phone (1) is none of them, and realistically, it could never reach the operator’s stores right now.
Launching to operators would cost too much
Let’s just say: it’s very hard to launch phones in the US.
A Samsung phone on T-Mobile, for example, has 38 mobile bands (35 without mmWave), along with Wi-Fi, Bluetooth, wireless switching and NFC, all of which has the Nothing Phone (1). All of these must be tested and approved by the FCC, which can be incredibly expensive. Without this proof it is illegal to sell a device in the United States. If the device does not meet FCC standards, this could mean weeks or months of tracking engineering to get the device to work within U.S. standards, which is costly.
The FCC test itself is not that expensive, but it does UL battery and carrier certification. UL certification of the battery, which tests to make sure the battery meets a nationally recognized safety standard, is optional but almost necessary in the U.S. and can cost tens of thousands of dollars. Carrier certification, on the other hand, will cost millions. If the phone also included mmWave, it would require Qualcomm mmWave certification and also licenses for mmWave patents, which can be up to seven digits. Added up, it can be incredibly expensive
That. It is very expensive to launch a phone in the US today. Only the carrier certification can have 7 digits. Then, some of the US network specifications are a bit fragmented from RoW, so you need a specific US SKU.
– Shen Ye (@shen) June 23, 2022
There is also carrier certification. Manufacturers like Nothing should send devices to carriers like T-Mobile, AT&T and Verizon and let them test on their networks. This is not just to sell on these networks, but to use full network access. If the phone (1) did not meet one of the operator’s standards, this would not require anything to fix the phone and try again. This would not only take weeks, but would delay software updates, like the one we see with Samsung phones. Without this carrier certification, you would not be able to use voice over LTE on AT&T, without 5G, irregular service (if any) on T-Mobile, and no service on Verizon.
Nothing is a startup, whether they want to or not
With all the hype for Nothing, it may not seem like it, but the company is a startup.
Nothing has the support of a billion-dollar multinational company like Xiaomi or OPPO if they need financing or parts. This means you have to have investors and bank financing. This means debt, loans and large lines of credit.
Nothing, unlike most companies, can’t allow a phone to fail in a market. To be able to pay off these debts, a failure cannot be allowed: spending up to millions of dollars not to recover them is simply not sustainable.
There are also ongoing costs after launching the device, which includes paying for the operator certification with each update you try to push. When you do monthly security updates, this is a monthly expense that is only worth it if it sells well. If it isn’t, it’s just burning money. You might think, “Well, if it doesn’t sell well, reduce your losses and stop with US upgrades.” This is even worse, because it means bad press from all the major tech media and YouTubers until Nothing agrees to burning more money, and probably also burning bridges with customers. Take a look at the situation Qualcomm has recently been in with its Snapdragon Insiders phone.
Beyond that, Nothing would need a U.S. customer service helpline, a broken product repair program, a warranty claim system for devices, a distribution network for shipping devices , warehouses to store products and much more than me. list t. All of these are investments that make no sense in a market where the phone is destined to fail.
After this news about the Nothing Phone (1) that was not released in the US, I saw some Twitter users say something like, “If you don’t try, you can’t succeed.” Frankly, this doesn’t work for startups when it comes to risking millions of dollars. The failure of this product could mean that they cannot invest as much in future products, future growth or support.
Do you think Nothing will ever launch a phone in the US?
I wouldn’t be surprised if Nothing took its time to launch in the US – I saw them waiting two or three generations until they had a real star product. A true internally developed flagship device cost $ 100 million; they can’t raise more than $ 100 million in funding and investors to create a project like this, because it would probably fail without any brand loyalty or track record. It will take time.
If and when Nothing ends up doing it, Nothing could be a great phone for the US, but that moment is not now. Instead, Nothing will create a device they know will lure everyone into markets that are less expensive to enter.
Everything is fine if Nothing can make a few more generations and launch a few more devices; then, we could get what we technology enthusiasts want. Until then, though, it takes a little patience. Nothing knows what they are doing; I trust that they will make the right decisions throughout the …