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UK-based consumer tech company Nothing is setting its sights on the US, with ambitions to take over of Apple iphone
The startup, the hardware company of Carl Pei, co-founder of Chinese mobile phone maker OnePlus, is in initial talks with US carriers about launching a new smartphone in the US, Pei told CNBC, without name any of the operators.
In July, Nothing released the Phone (1), a mid-range device with a similar design, price, and specs to Apple’s basic iPhone SE.
The company, backed by iPod creator Tony Fadell and of the alphabet VC arm GV, has so far only released its smartphone in Europe, the Middle East and Asia, not the US or Canada.
“The reason we didn’t release it in the US is because a lot of additional technical support is needed, to support all the carriers and their unique customizations that they need to do on top of Android,” Pei explained in an interview with CNBC. . “We felt like we weren’t ready before.”
“We are now in talks with some carriers in the US to potentially launch a future product there,” the Sino-Swedish businessman said.
the likes of Apple Y samsung they have already established relationships with large US carriers, making it difficult for smaller companies to compete.
But a third of the sales of its recently launched Ear (stick) headphones currently come from the US, Pei added.
“It is definitely a market where there is already a lot of interest in our products. And if we launch our smartphones there, I’m sure we could get significant growth,” he said.
The company expects its revenue to more than tenfold in 2022, from about $20 million in 2021 to an estimated $250 million this year, according to figures shared exclusively with CNBC. It has also more than doubled its employees to over 400. Yet the company continues to lose money.
“The goal is to be profitable by 2024,” Pei said. “We are not profitable right now. And this year was even more difficult because of the foreign currency exchange. We paid a lot of our COGS [cost of goods sold] in USD but we made money in pounds, in euros, in Indian rupees, so everything was devalued against the USD.”
The US dollar has risen this year; the dollar index – which measures the dollar against a basket of major currencies – is up more than 8.5% so far this year.
taking on apple
Pei wants to challenge Apple’s iPhone in the US, but it’s a steep hill to climb.
“There’s a challenge with Android where iOS is becoming more and more dominant. They have a very strong block with iMessage, with AirDrop, especially among Gen Z. That’s a growing concern for me,” he said.
“There may be a time when Apple is like 80% of the overall market and that just doesn’t leave enough room for Android-based manufacturers to keep playing,” he said.
Apple was not immediately available for comment when contacted by CNBC.
Pei says that he sympathized with Elon Muskwho as the new CEO of Twitter has lobbied Apple for its App store restrictions and 30% tax charge for in-app purchases.
He added that, in a couple of years, Nada may have to “think seriously about this issue and how to address it.”
“It will create a ceiling for our growth,” Pei said.
david vs goliath
Pei said his company has faced a lot of challenges in getting its products to market. One of the biggest setbacks he faced when he approached Foxconn, Apple’s biggest iPhone supplier, to make his phones.
According to Pei, Foxconn refused to do business with Nothing, citing past failures in the smartphone industry.
“All the start-up manufacturers have worked with Foxconn,” Pei said. “But when it was our turn, they said no because every start-up they worked with failed. And every time a company failed, Foxconn lost money, they couldn’t recover their costs.”
Foxconn was not immediately available for comment when contacted by CNBC.
Covid restrictions around the world also presented a major hurdle for the company. In India, where Nothing produces its phones, the company was unable to send engineers due to travel restrictions, and Pei said the company had to run its onshore factory remotely.
“We really had to rush to create this,” he said of Nothing’s smartphone.
In Shenzhen, China, where officials imposed strict lockdowns, Nothing engineers had to discuss component designs and mechanics during mandatory 45-minute periods when it was acceptable for people to go out and buy food.
Nada has sold more than 1 million products to date worldwide, with its Ear (1) headphones selling 600,000 units and the phone (1) reaching 500,000 shipments.
Still, the startup is a small player and faces a bleak economic outlook in which people are forced to limit their spending drastically.
In Europe, smartphone shipments fell 16% in the third quarter on a year-over-year basis, although they were up slightly from the prior quarter on the back of a strong launch of the iPhone 14.
Samsung is Europe’s largest smartphone maker with a 35% market share, followed by China’s Xiaomi 23% and Apple 21%.
