Nothing to See Here (Premium)

Because the smartphone market has matured into a two-horse race, some enthusiasts are hoping for an upstart to somehow shake up the industry so that it can return to the rapid innovation cycle that defined its first decade. But this thinking is misguided. More specifically, I have bad news for anyone who believes that Carl Pei and Nothing can in any way make a difference.

But let’s start at the beginning.

The smartphone era started in 2007 with Apple’s introduction of the iPhone. As expected, the rest of the industry quickly course-corrected to copy this innovative device. Over time, one major alternative—Google Android—emerged, while all of the other competition—Blackberry, Motorola, Nokia, Windows Mobile, etc.—succumbed one by one. In 2021, 83 percent of all smartphones sold ran Android, while the remaining 17 percent were iPhones.

So there’s the market, right? Mostly Android handsets and some iPhones.

Not quite. In affluent western markets like the United States and much of western Europe, the iPhone often has closer to 50 percent share. And by many accounts, Apple reaps nearly 100 percent of the profits in the smartphone industry, thanks to its incredible margins. So the marketshare numbers don’t tell the full story.

OK, so that’s the market then, right? Some mix of Android and the iPhone.

Not quite. In most of the western world, there are two players, but they aren’t necessarily Android and the iPhone. They’re Samsung and the iPhone. Samsung controls roughly 20 percent of the global market by sales, and among smartphone makers, it is also the only company not named Apple that makes a profit doing so. More to the point, Samsung is the only major smartphone maker not named Apple that provides a full ecosystem of products and services to complement those phones. As such, many Android users are really Samsung users, and as the maker of Android, Google’s role is mostly reduced to creating the core OS, maintaining the platform’s main app store, and creating some key apps and services.

(The smartphone market is quite different in China, in particular, and in some other markets with which I’m not particularly familiar. For purposes of this discussion, I’m mostly referring to North America and western Europe here.)

Smartphones evolved rapidly in the wake of the iPhone, thanks to competitors trying to catch up to and then leapfrog Apple, and in part because the market was so new and had plenty of headroom for innovation. But in recent years, things have shifted. Through market failures and consolidations, there are fewer major players now. (And it is perhaps notable that three of the top five smartphone makers are from China, a market so large that it can float companies that most have not even heard of in the west.) And feature sets have mostly consolidated, with defined capabilities and price points across the low-end, middle, and high-end of the market.

In other words, the smartphone market is now quite mature, so it naturally moves at a more evolutionary pace. But more importantly, the smartphone is also the most successful personal computing device of all time, the one that most people own, both because they want to and because these devices are, for so many of us, necessary.

To put numbers to this, in 2021, a year in which PC sales were artificially high because of the pandemic-forced move to hybrid work, hardware makers still sold almost four times as many smartphones (1.39 billion units) as they did PCs (344.3 million units). And from an overall usage perspective, there are well over four times as many smartphone users worldwide (6.65 billion) as there are PC users (1.5 billion, 1.4 billion of which are running Windows 10 and 11). And remaining growth in emerging markets—the so-called “next billion users”—will likewise be heavily tilted towards smartphones, not PCs.

But as always, numbers don’t tell the full story: where most people sit in front of a computer only when they need to get specific kinds of work done, many if not most people also spend the entire day interacting with their smartphones. This engagement is hard to quantify, but no one would argue that people are generally far more engaged on their smartphones—interacting with people, consuming social media, reading, playing games, whatever—than they are on PCs. Whatever your take on this, smartphones aren’t just important to most users, they are the most important personal computing device they own.

As such, the smartphone market is where the PC was several years ago. We will see some interesting feints—folding displays, as an obvious example—but the basic story remains unchanged. Folding display devices may eventually become a big part of the smartphone market, but they will always be just a part of that market, and not the next device. And that’s because as useful as one device that can replace two devices is, the second device that a foldable smartphone replaces—a mini-tablet—is not essential. It’s a useful feature, a nicety, and will be welcome by many. But that’s all it is.

(Multitouch and tablet/convertible form factors played a similar role in the PC space. Remember that Bill Gates once believed that Tablet PCs would take over the market and replace laptops as the most common portable PC. But that never happened because not everyone wants or needs that functionality.)

In recent years, innovation in the smartphone space has amounted to temporary initiatives to bring premium smartphone features to more affordable price points and new form factors, mostly in the folding category. Processors, camera systems, and other components get steadily beefier and more capable, but the underlying platforms are never changed in major ways. Because they can’t be. The market is simply too big to accommodate major change. Users expect things to just work, and to just work in the way that they expect. And they prove that by picking Samsung and Apple, the two biggest and most consistent smartphone platforms, again and again and again.

To me, the most important trend is the democratization of technology, something that Microsoft did quite well during its rise to the top of personal computing in the 1990s: you take features and functionality that were previously too expensive or too complex and you make them accessible to the masses. And so I embraced attempts to do likewise in the smartphone industry, from the more affordable put powerful Google Nexus and Pixel handsets to OnePlus and its “flagship killers.” And it is perhaps not surprising that Samsung’s mid-level A-series smartphones are the best-selling model in the market.

But profits matter too. And in fighting this trend and its impact on their bottom lines, Apple and Samsung were also able to raise the average price of smartphones in recent years by heavily marketing the unique high-end features of their premium offerings, like their next-generation camera systems and foldable displays. And so new high-end iPhones are now $1000 and up, and Samsung non-folding flagships start at $1200. The foldable Samsung Galaxy Z Fold is even more expensive, starting at $1800. And so the gap between the rich and poor has grown even wider.

As enthusiasts, we naturally wonder about the next big shift. Microsoft, which lost in the smartphone market, agonized over what it called “the next wave,” but it also lost in the market for digital personal assistants, with Amazon Alexa and Google Assistant (and Apple Siri, to a much lesser degree) defining that market. Regardless, nothing obvious has emerged. Voice control, like multitouch and foldable displays, remains something additive and hasn’t disrupted previous personal computing paradigms. And Augmented Reality (AR) and Virtual Reality (VR), despite big pushes in recent years, haven’t amounted to much and look to be additive as well.

But let’s focus on the smartphone market here, which, again, remains stuck in a stalemate of maturity and creeping evolution. If the next big shift isn’t obvious or happening yet, why can’t smartphones be more interesting? Wasn’t it exciting watching Steve Jobs unveil the iPhone in 2007? Why can’t we experience that magic again?

There are a lot of reasons, the most obvious being the maturity of this market, but magic like that is hard to capture and impossible to duplicate. Steve Jobs was a unique individual, and there is no one like him—not at Apple, and not at any other company—who can duplicate his strange combination of raw magnetism and certainty about the future. God knows many have tried, including some at Apple: just watch any Apple videos featuring Scott Forstall, once a key Jobs acolyte, to see what I mean. (I used to refer to him as “the dark son” because of his obvious Jobs fetish.)

But it’s not just Apple. Since the Steve Jobs era, every manner of tech leader has tried to emulate Jobs, and all have failed dramatically. I assume most readers are familiar with Steven Sinofsky’s sad repetition of the phrase “and we’re just getting started” in the Windows 8 wind-up. But for a classic example, watch (ex-Apple exec) Jon Rubinstein do his best Steve Jobs imitation when launching the Palm Pre at CES 2009. Or Xiaomi founder Lei Jun, one of many fake Steve Jobs from China. Or Elizabeth Holmes, the disgraced founder of Theranos who, like Lei Jun, copied Jobs’s style down to her clothing choices. Or watch literally any tech presentation that was created in the wake of the iPhone; the entire industry was impacted not just by Jobs’ technology choices, but by his presentation style as well.

OnePlus and its cofounders, Pete Lau and Carl Pei, fell neatly into this trap as well. Not just by copying Apple’s product designs, but by trying to emulate Steve Jobs and Apple in their own product presentations and marketing. But what made OnePlus work was its laser focus on value: here, we had a company targeting enthusiasts who wanted the very best hardware—remember, “no compromises”—but at a more reasonable price point. As a result, OnePlus is the rare example of a Chinese company that saw a reasonable amount of success in the United States and even more success in western Europe (which isn’t truly unique; several Chinese smartphone makers have made inroads there).

It’s possible that OnePlus was too successful. Through a series of mergers and changes that are still shaking down, OnePlus essentially merged with OPPO, its sister company at BBK Electronics. And today, OnePlus is technically just a subsidiary of OPPO. Attempts to merge the two firms’ hardware and software efforts have seen mixed results at best—OnePlus OxygenOS 12 is considered a disaster—and the previous laser focus at OnePlus is now much vaguer, with the firm now shipping a variety of barely different handsets in multiple markets. Prices have edged upwards too, with the OnePlus 9 Pro reaching $1000 just like the iPhone Pro lineup.

In the wake of the merger with OPPO, OnePlus co-founder Carl Pei stepped down and started his own company, the terribly-named Nothing. Over time, this tiny company released a pair of earbuds for some reason, raised capital, and then finally announced recently what we all knew was coming: Nothing is going to make a smartphone. Because of course it is. Just like OnePlus before it.

This is the dumbest idea in a history of dumb ideas.

And to understand why that is true, all you need to do is watch the launch event, which the company branded as “THE TRUTH.” Here, we get to see Pei repeat all the same mistakes of the past, as he attempts to emulate Steve Jobs, but without any of the charisma, drive, or rationale of his idol. When Steve Jobs introduced the iPhone, he was changing the world. When Pei announced that he was making a smartphone, all we see is a bland, entitled imposter pretending that this market needs to be exciting again. There is an audience for this nonsense, of course. But it is a very small audience.

Everything about Nothing is wrong. The brand is terrible. Its dot matrix branding is horrific and so hard to read it feels like an oncoming vision problem. Its leader, as noted, is boring and bland, even as he moans about the lack of excitement in the market he seeks to rejuvenate. But he’s not doing this for the masses. He’s doing it for himself, and his ego. And for some small audience of enthusiasts who, for whatever reason, can’t see past this pointless façade.

Here’s what the world doesn’t need. Yet another small hardware maker making yet another slab of glass and aluminum running yet another version of Android without a single iota of ecosystem to back it. We have two major ecosystems already, from Apple and Samsung, and—no offense to Pei—they work. And that’s all we need. It may not be all he wants. But it is all we need.

There is some hope for alternatives, of course. But not Nothing, which is more tricycle than Tesla. Google may finally get it right with the Pixel 6a and Pixel 7 series, for example, and this company already has an ecosystem of its own too. And if OnePlus can get ahead of its camera system deficiencies—it’s so close—and its merger mess, it’s already in place to be the upstart Nothing wants to be.

“You may not get it yet, but trust me,” Pei says, “it’s stunning.”

Trust you? Sorry, but I don’t trust you. At all. And neither should anyone else who cares about the smartphone industry. Indeed, it’s doing just fine without you.