Yesterday, Nothing announced that its upcoming Nothing Phone (1) would not launch in the United States. There were plenty of people in the tech community who were outraged that nothing was marketing its device enough in the United States to ignore it at its first major device launch. While this may sound like a betrayal or that not ignoring the millions of tech enthusiasts in America, it makes sense for them not to launch the phone (1) here. Let me explain
Brand loyalty is a big deal
Look, Brand Loyalty is one of the largest sellers of products worldwide, both within and outside technology. In 2019, 90.2% of consumers reported being loyal to a brand – this is especially true when it comes to the tech market in the US. Customers who use Samsung, Apple, and Google products are more likely to continue buying from that company, and that loyalty is much more difficult to break. Most of it is just out of control. Even if they did, the customer acquisition cost (CAC) would be incredibly high, making it not worth the marketing dollars spent on it.
Seeing nothing on a technical level, the phone (1) doesn’t offer anything worthwhile new features or specs To make it switchable to the consumer. This is a $500~ phone running a mid-range processor with an average display, dual cameras and a boring design, outside the LEDs on the back Which will be covered by just one case. The device doesn’t offer anything that would create FOMO (fear of missing out) in customers, or any feature that leaves a current and potentially already heavy investment in the ecosystem. Samsung, Apple and Google have very strong brand loyalty and nothing offers, well, nothing.
Nothing Can Compete With Google, Samsung, and Apple Without Carriers
There’s no room for the Nothing Phone (1) right now for carriers: This is another $500 phone that doesn’t really bring the outside of an unusual design to the table. There are a lot of better phones in that price range in the US market that carriers already sell from much bigger players. Carriers at the scale of Apple, Samsung, or Google to train store employees will never be able to afford or manage anything for a sales rep for the store.
You might be wondering why I’m focusing on carriers in particular. Well, that’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 in use in the US in 2020. Phone numbers account for just 17% of the total 294.15 million smartphones in the US. It makes no sense to focus on minorities, who are more reluctant to buy a single device, as they are not being coerced into contracts and payment plans.
Those other 244 million devices will be locked in and sold through carriers, possibly on payment plans that are subsidizing the cost of the devices. This allows for great financing deals that keep you on the carrier and device, but also allows the price of the $1000 phone to be spread out into payments of $24 per month for 36 months with a $150 down payment, which is now available for US carrier financing. is the standard term. deal. With the average selling price of 5G phones in the US recently being $815, a $500 phone doesn’t seem like a market fit.
A $300 phone that can be given away as a trade-in or promotion with a new line will do well on the carriers—as well as a $1,000 phone that can be financed. A $500 financing plan doesn’t make much sense when the difference between that and $1000 is about $10 a month (since a $500 phone usually won’t have a down payment).
Meanwhile, it doesn’t even make sense to spend $500 in cash when the Pixel 6, a well-marketed device with a better camera and processor from a name brand, is $600 and likely exempted outside carrier subsidies. . The Nothing Phone (1) is a phone that has no place in the market, which might not be willing to accept it.
Ignoring carriers, if anything doesn’t want to sell its device unlocked and offers its own financing through its website to sell the phone (1), it will need to find a bank that does. who is ready to handle the financing. Banks such as TD Bank handle the financing of Samsung’s financial plans for companies like Samsung, not Samsung itself. In a volatile market, banks are unwilling to work with startups on financing such consumer equipment. Without carriers subsidizing the phone, it’s unlikely that anything would see mass sales.
To reach the US market in a meaningful way, it wouldn’t need a unique flagship or very cheap equipment on a US carrier. The Nothing Phone (1) has none of them and may never actually be made in carrier stores right now.
Will cost a lot more to launch on carriers
Simply put: it costs a lot to launch a phone in the US.
For example, a Samsung phone on T-Mobile has 38 cellular bands (35 without mmWave) with Wi-Fi, Bluetooth, wireless changing, and NFC—all of which are Nothing phones (1). All of these need to be tested and approved by the FCC, which can be incredibly expensive. It is illegal to sell any equipment in the United States without this test. If the device doesn’t meet FCC standards, it could mean weeks or months of follow-up engineering to get the device to work within US standards, which tends to be costly.
The FCC test itself isn’t that expensive, but the battery is UL and carrier certification. Battery UL certification, which tests to ensure that the battery meets a nationally recognized safety standard, is optional but almost required in the US and can cost thousands of dollars. On the other hand, career certification will cost lakhs. If the phone also includes mmWave, it would require mmWave certification from Qualcomm and a license for the mmWave patent, which can be up to seven digits long. Added up, this can be incredibly expensive
This. It is very expensive to launch US phones nowadays. Career certification alone can be of 7 marks. Again some US network spec is somewhat fragmented from ROW, so you need US specific SKUs.
— Shen Ye (@shen) 23 June 2022
There is also carrier authentication. Nothing will require manufacturers to ship devices to carriers like T-Mobile, AT&T, and Verizon and test them on their own networks. It is not only to be sold on those networks, but to use the full access of the network. If the phone (1) doesn’t meet one of the carrier standards, nothing will be required for the phone to be repaired and sent back for testing. Not only will this take weeks, but it will delay software updates, as we see with Samsung phones. Without that carrier authentication, you won’t be able to use Voice over LTE on AT&T, as well as 5G, spotty (if any) service on T-Mobile, and no service on Verizon.
Nothing is startup, they think so or not
With all the hype for nothing, it may not feel like it, but the company is a startup.
There is no backing of a multi-national company like Xiaomi or OPPO if they need funding or parts. This means it needs investors and bank funding. This means loans, loans, and huge lines of credit.
Nothing, unlike most companies, can’t afford a phone to fail in a market. To be able to pay back these debts, it can’t afford failure – it’s not sustainable to not pay back millions of dollars well spent.
There are ongoing costs even after the device is launched, including paying for carrier authentication with each update it tries to push. While doing monthly security updates, this is a monthly expense that is only worth it if it sells well. If it’s not, it’s just burning money. You might be thinking, “Well if it doesn’t sell well just cut your losses and stop with the US update.” It’s even worse, because it means bad press from every major tech news outlet and YouTuber unless something agrees to burn more money, and maybe even burn bridges with subscribers. Qualcomm recently took a look at the situation with its Snapdragon Insider phone.
In addition, a US support line for customer service, a repair program for broken products, a system for making warranty claims for equipment, a distribution network for shipping equipment, warehouses to store products, and more What I did’ wouldn’t be needed. T list. It makes no sense to make all these investments in a market where the phone is destined to fail.
After this came the news of Nothing Phone (1) not being launched in America, I saw something twitter user Saying something along the lines of “you can’t succeed if you don’t try”. Clearly, this doesn’t work for startups when it comes to risking millions of dollars. This product failure may mean that they are not able to invest as much in future products, future development or support.
Do you think nothing will ever launch a phone in the US?
I wouldn’t be surprised if it didn’t take anything longer to launch in the US – I could see them waiting two or three generations until they had a true flagship product. A true flagship device was developed in-house at a cost in the range of $100 million; They can’t just throw together $100 million+ from financing and investors to build a project like this, as it can fail without any brand loyalty or track record. it will take time.
Nothing can make a good phone call for America if and when it doesn’t end there, but that time is not yet. Instead, nothing is going to make a device that they know will widely appeal to everyone in markets that are less expensive to enter.
It’s all right if nothing can make it a few more generations and release a few more devices – well, we might get what we tech enthusiasts want. However, till then one needs to have some patience. no one knows what they are doing; I am sure they will make the right decisions down the road.
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