Were you bummed that Nothing’s Phone (1) didn’t get an official US release when the transparent Android phone launched last summer?
Are you disappointed with the $299 “beta membership” for US customers that gets you a phone (1) with the caveat that it only supports the N41 5G band on T-Mobile and there is no 5G connection on AT&T or Verizon doesn’t?
That all changes this year.
CEO and co-founder Carl Pei confirmed nothing Vice versa that the company will make a significant push in the US with its next flagship Android phone, the Phone (2), launching later this year. “We decided to make the US our No. 1 priority in terms of markets,” says Pei.
“We couldn’t do it earlier because we were only in our second year and our hands were tied building the team while we were building the products. Now that we are on a more solid footing, we can take a step forward.”
Party in the USA
The most important thing to know about Nix is that it is not just a company that creates new devices. When you buy into the brand and its eye-catching transparent product designs, you go on a journey with the company. It’s a bit like building a ship as it sails across the sea. Backing Nothing is risky because there is no guarantee that things will pan out. Any number of unforeseen circumstances can arise along the way. You have to be okay with the company starting from scratch, and be patient as it builds teams at every level. Even with a veteran like Pei, who co-founded OnePlus and helped grow it into a global brand and powerhouse, understanding that Nix is still figuring things out as he goes.
In several conversations over the past year, Pei explained why Nix didn’t have to build wireless earbuds in the direction of the phone (1) first, and why they couldn’t just launch the phone in the US. It really comes down to the numbers and logistics. For a start, the Ear (1) was in many ways a test to measure demand.
“Last year we achieved almost 10 times the revenue [in 2022 globally] in comparison with [2021],” said Pei. “We did over $200 million USD last year; the first year we did something like $24 million USD. We are growing quite fast. We have already shipped over a million products.”
The astronomical growth in revenue and unit sales in regions with less hassle to launch products provided two important things for Niks. One: Prove that there is a demand for its products. And two: The volume gave the company more leverage with component suppliers and production factories that previously refused to work with them in the early days.
“When you make a smartphone for the US, you have to work with the carriers on certification and adapt some of their features to your operating system,” says Pei. “Before we didn’t have the resources for that and now we do.”
The key word here is resources. Pei tells me the company doubled in size last year, growing from 200 people in 2021 to 400 today. More people means more brains to work on things like carrier certification, quality assurance, marketing, retail logistics, etc. This is basic Business 101.
“We are very excited about the US market because it is a big country. If you look at our earbud sales, about one-third come from the US and by not launching our phone in the US, we’re potentially leaving a third of the volume on the table.”
“By not launching our phone in the US, we’re potentially leaving a third of the volume on the table.”
This is not just a business play. Pei says the company’s research indicates “[U.S.] consumers as a whole are quite bored and indifferent [with existing phones]” and “foot traffic to the stores for people checking out new phones did not increase.” With “not a lot of variety in terms of the smartphone products in the US market,” Pei believes Nothing can move in and bring back fun hardware and competitive pricing.
Pei’s assessment of the US phone market is not wrong. Smartphone shipments fell 18.3 percent year-over-year this past holiday season, and are set to decline 11.3 percent overall in 2022, according to IDC. This is the largest decline in annual phone shipments since 2013. While the large decline in phone sales can be attributed to several factors, including supply chain constraints and inflation, it is also true that smartphone innovation has nearly plateaued among the majority of American consumers. Choosing an iPhone from Apple or a Galaxy from Samsung. According to Counterpoint, Apple has 50 percent of US smartphone sales as of Q3 2023 and Samsung has about 24 percent. The remaining 26 percent is split between Lenovo (6 percent), OnePlus (1 percent) and “others” (19 percent).
“From a business point of view, [Apple and Samsung] don’t go too niche and try something completely different because that might alienate current users. That’s where smaller companies like us can come in and try to do something different. It’s not that we’re smarter or that they can’t, but it just doesn’t make sense for them to do it.”
Phone (2)
Is it any surprise that Nothing’s next Android phone will be called the Phone (2)? While Pei confirmed the smartphone name and its launch “later this year”, he did not share with me what the device would look like.
“Should I just send you the phone (2) versions?” Pee jokes. “It would destroy the launch. Maybe go to Midjourney and have [it] imagine something.” I laugh at his reaction, but maybe…
When I pressed him further for something on the Phone (2), he is careful with his phrasing. “We are developing a smartphone that is more premium than the Nothing Phone (1) and software will be a big focus area for us,” says Pei. I tell him that “more premium” sure sounds like a smartphone that competes with the iPhone Pros and Samsung Galaxy Ultras and Pixel Pros of the world. I ask if we can expect specs like Qualcomm’s top-of-the-line Snapdragon 8 Gen 2 chipset, as opposed to the mid-range one in the phone (1). I draw parallels between the phone (2), a premium phone that could potentially undercut the competition on price, and previous OnePlus phones that offered flagship specs without the flagship prices.
“I think the market and the industry have moved a lot since those days. For us, the Phone (1) spec sheet was quite useful in terms of user experience,” says Pei. “Mobile chipsets have really improved over the last 7–9 years. Therefore, I want to avoid calling the phone (2) a flagship, because that would mean that the phone (1) was not a flagship. Within our own portfolio of smartphones, the phone (1) was very much a flagship in terms of the amount of care we put into the product. That’s why I used the word ‘premium’ [to describe the Phone (2)] instead, indicating it’s a more premium step, but it’s still a flagship just like the phone (1).
“I want to avoid calling the phone (2) a flagship, because that would mean that the phone (1) was not a flagship.”
We’ll have to wait to learn more about the Phone (2)’s hardware, but I think it’s safe to say that it will likely build on the transparent industrial design used by the Phone (1) and the rest of Nothing s product created is standing in a row. I’d also bet that the Glyph interface—the customizable LED system on the back of the phone (1)—makes a return on the phone (2), this time perhaps with an API that will enable third-party developers set to configure for it.
Clear hardware remains the core of Nothing’s identity, but the company is also investing heavily in software for the phone (2).
“When we started Phone (1), we only had about five engineers on the mobile team, so a lot of the work had to be done by other companies,” Pei says of the outsourced Nothing OS software. “Now our team is close to 100 people on software, and I’ve brought in a lot of people I’ve worked with before in my previous life.”
He says he’s “confident” the improved software team can create a “really fast and smooth experience now based on Android, which matches what I look for in software.” Hmm, where have I heard “fast and smooth” before? Android 13 beta is “completely made in-house”, says Pei. “People really feel that the Android 13 beta we released is a step up from the previous Nothing OS that was half in-house and half outsourced.”
Citing hardware design as the No. 1 reason for iPhone users “switching back to Android via our brand,” he makes sure software isn’t left behind. “It’s going to take a while; it’s going to be step by step, so we’re not going to see the whole vision unfold right away.”
More Nothing Retail Stores
Expanding into the US with the phone (2) is Niks’ top priority in 2023. Opening more retail stores in other regions is yet another. Pei tells me Nothing’s first retail store, which opened in London’s Soho district in December, was a hit.
“The store already pays for itself operationally,” says Pei. “But in order for it to pay back the initial investment in the design and decoration of the store, I think we need a slightly richer product portfolio with more products.”
As predicted, Nothing’s brick-and-mortar location next to the Supreme store generated strong foot traffic and curiosity about its products. “There’s a line of young and hip people — like for Supreme — and they have to walk by our store,” says Pei. “They walk in and we get a chance to talk to them.”
The Nothing store is “experimenting” and its location is a better value than a billboard in the heart of London according to Pei. He says a billboard would probably cost more and not offer the same hands-on experience for consumers.
The next phase is to open more stores worldwide, but where exactly is something Pei is thinking about. They are considering a store in the US, but are careful not to “overextend ourselves.” Not to mention, the likely coming recession could affect the plans. Even so, Pei is optimistic that even in the economic downturn, this could be an opportunity for Nothing to pick up a valuable property at a bargain.
