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Nothing Carl Pei plans to launch a smartphone in the US to take on the iPhone

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The telephone of nothing (1).

Nothing

UK-based consumer tech company Nothing is looking to the US, with ambitions to take Apples iPhone.

The startup, the hardware company of Carl Pei – co-founder of Chinese mobile phone maker OnePlus – is in talks with US carriers about launching a new smartphone in the US, Pei told CNBC, without naming none of the operators.

In July, Nothing launched Phone (1), a midrange device with a similar design, price and specs to Apple’s entry-level iPhone SE.

The company, backed by iPod creator Tony Fadell and alphabetical So far, VC arm GV has only launched its smartphone in Europe, the Middle East and Asia, not in the United States or Canada.

“The reason we didn’t launch in the US is that you need a lot of additional tech support, to support all the carriers and their unique customizations that they have to do on Android,” Pei explained. in an interview with CNBC. . “We felt we weren’t ready before.”

“We are now in talks with some carriers in the United States to potentially launch a future product there,” the Chinese-Swedish entrepreneur said.

The tastes of Apple and Samsung have already established relationships with major US carriers, making it harder for smaller companies to compete.

But a third of the sales of its recently launched Ear (stick) headphones currently come from the United States, Pei added.

“It’s definitely a market where there’s already a lot of interest in our products. And if we launch our smartphones there, I’m sure we could achieve significant growth,” he said.

The company expects its revenue to grow more than tenfold in 2022, from around $20 million in 2021 to around $250 million this year, according to figures shared exclusively with CNBC. It also more than doubled its employees to over 400. However, the company is still losing money.

“The goal is to be profitable in 2024,” Pei said. “We are not profitable at the moment. And this year has been made even more difficult due to the exchange rate. We pay a large part of our COGS [cost of goods sold] in USD but we make money in Pounds, Euros, Indian Rupees – so everything is devalued against USD.”

The US dollar has recovered this year; the dollar index – which measures the greenback against a basket of major currencies – is up more than 8.5% year-to-date.

Take 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 lockdown with iMessage, with AirDrop, especially among Gen Z. So that’s a growing concern for me,” he said. -he declares.

“There could be a time when Apple is around 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 he sympathized with Elon Musk, who as Twitter’s new CEO lobbied Apple over its App Store restrictions and 30% fee on in-app purchases.

He added that, in a few years, Nothing may have to “think seriously about this problem and how to solve it”.

“It’s going to put a ceiling on our growth,” Pei said.

David versus Goliath

Pei said his company has faced a plethora of challenges in bringing its products to market. One of the major setbacks he faced was when he approached Foxconn, Apple’s largest iPhone supplier, to manufacture his phones.

According to Pei, Foxconn refused to do business with Nothing, citing past failures in the smartphone industry.

“Every startup manufacturer has worked with Foxconn,” Pei said. “But when it was our turn, they said no because all the startups that worked with them failed. And every time a startup failed, Foxconn lost money on it, they weren’t able to recover their costs.

Foxconn was not immediately available for comment when contacted by CNBC.

Covid restrictions around the world also presented a significant hurdle for the company. In India, where Nothing produces its phones, the company was unable to send engineers by air due to travel restrictions, with Pei saying the company had to run its factory in the field remotely.

“We really had to scramble to create this,” he said of Nothing’s smartphone.

In Shenzhen, China, where authorities imposed strict containment measures, engineers at Nothing had to discuss component design and mechanics for mandatory 45-minute periods when it was acceptable for people to go outside. to do their shopping.

Nothing has sold more than a 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 it faces a bleak economic outlook where people are being forced to drastically limit their spending.

In Europe, smartphone shipments fell 16% in the third quarter year-on-year, although they were up slightly from the previous quarter thanks to the strong launch of the iPhone 14.

Samsung is Europe’s largest smartphone maker with 35% market share, followed by China’s Xiaomi at 23% and Apple at 21%.

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