OnePlus co-founder Carl Pei’s new startup wants to launch the smartphone in the U.S. to take on Apple

OnePlus co-founder Carl Pei's

OnePlus co-founder Carl Pei’s new startup wants to launch the smartphone in the U.S. to take on Apple: Nothing, a consumer technology business based in the United Kingdom, which has set its sights on the American market in an effort to compete with Apple’s iPhone.

Carl Pei, the co-founder of Chinese mobile phone manufacturer OnePlus, told CNBC that his business is in early discussions with American carriers about introducing a new smartphone in the U.S., though he did not specify which carriers they were talking to.

Nothing released Phone (1) in July; it is a midrange handset with a price, design, and specifications comparable to the entry-level iPhone SE released by Apple.

The business has only released its smartphone in Europe, the Middle East, and Asia so far; the United States and Canada are not among the target markets. The startup is financed by iPod founder Tony Fadell and Alphabet’s VC arm GV.

In an interview with CNBC, Pei said that the lack of a U.S. release was due to the fact that “you need a lot of additional technical assistance, to support all the carriers and their specific adaptations that they need to make on top of Android.” “At the time, we didn’t think we were prepared.”

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“Now we are in conversations with various carriers in the U.S. to potentially offer a future product there,” the Chinese-Swedish entrepreneur stated.

Smaller companies have a harder time competing with industry giants like Apple and Samsung, which have longstanding partnerships with major U.S. carriers.

Pei noted that the United States accounts for one-third of the company’s current Ear (stick) headphones sales.

“It’s unquestionably a market with considerable potential for our offerings. And I think we could see substantial expansion if we introduced our devices there,” he said.

According to estimates exclusively given with CNBC, the company anticipates a tenfold increase in revenues in 2022, from around $20 million in 2021 to an anticipated $250 million this year. It has also increased its workforce by a factor of two, reaching over 400 people. The company is still losing money, though.

OnePlus co-founder Carl Pei's
OnePlus co-founder Carl Pei’s

The target is to turn a profit by 2024, as stated by Pei. We are currently not making a profit. The foreign exchange rate also made things more challenging this year. Many of our COGS are denominated in US dollars, but we conduct most of our business in other currencies and have seen a significant increase in profits as a result of the depreciation of the pound, euro, and Indian rupee.

There has been a significant appreciation of the U.S. dollar this year; the dollar index, which compares the value of the dollar to that of a basket of other major currencies, is up more than 8.5 percent so far this year.

Competing with Apple

In the United States, Pei hopes to fight the iPhone from Apple. However, this is a really challenging hill to conquer.

The increasing dominance of iOS presents a problem for Android. Especially among the millennial generation, iMessage and AirDrop have achieved near-complete market dominance. Therefore, that is becoming increasingly worrying to me,” he explained.

At some point, “Apple may be like 80% of the whole market, and that just does not leave enough space for Android-based manufacturers to keep playing,” he said.

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According to data from Counterpoint Research, Apple’s active installed base, which includes consumers who acquired phones second-hand, topped 50% in the U.S. in the second quarter, overtaking Android.

When CNBC reached out to Apple for comment, no one answered the phone.

Pei has expressed his solidarity with Twitter’s new CEO Elon Musk, who has criticized Apple for the limits it has imposed on the App Store and the 30% fee it charges for in-app sales.

He continued by saying that Nothing might “have a real think about this topic and how we solve it” in a couple of years.

Pei warned that this limit would slow the company’s expansion.

A David vs a Goliath story

According to Pei, his company has encountered numerous difficulties on the road to commercial success. For example, it encountered significant difficulties when it attempted to have its phones manufactured by Foxconn, Apple’s primary iPhone supplier.

Pei claims that Foxconn turned down business with Nothing because of the company’s track record of failure in the smartphone market.

Foxconn has helped “every new manufacturer,” according to Pei. Unfortunately, when it came to us, they declined on the grounds that they had seen the same result with every startup they had worked with previously. Foxconn lost money on every single firm that went under because it was unable to repay its investments.

Covid regulations all over the world were also a major roadblock for the business. Nothing’s phones are manufactured in India, but Pei says the company could not send engineers owing to travel constraints, so instead, they had to oversee the manufacturing from afar.

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They had to “rush” to make Nothing’s smartphone, he claimed.

During the mandatory 45-minute periods when citizens in Shenzhen, China, were allowed to walk outdoors and get groceries, Nothing’s engineers had to debate component designs and mechanics.

So far, Nothing has shipped over 1 million devices worldwide between its Ear (1) and Ear (stick) earbuds and its Phone (1).

Even still, the firm is a little player, and it faces a dismal economic forecast in which consumers are obliged to make severe cuts to their expenditures.

Smartphone shipments in Europe fell 16% year over year in the third quarter, according to statistics from Counterpoint Research, but they were up somewhat sequentially because of the success of the iPhone 14.

Among European smartphone manufacturers, Samsung holds a 35% market share, behind only Chinese rival Xiaomi (23%) and American leader Apple (21%).

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