Carl Pei’s Nothing plans smartphones in the US to fight the iPhone

UK-based consumer technology company Nothing has set its sights on the US with an ambitious apple iPhone.

The startup, the hardware venture of Chinese phone maker OnePlus co-founder Carl Pei, is in early talks with U.S. carriers about launching a new smartphone in the U.S., Pei told CNBC, without naming any carriers .

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

The company was founded by iPod founder Tony Fadell and Alphabetical The VC arm GV, so far only launched smartphones in Europe, the Middle East, and Asia, not the US or Canada.

“The reason we didn’t launch in the U.S. is because you need a lot of additional technical support to support all the carriers and the unique customizations they need to have on top of Android,” Pei explained in an interview with CNBC. “We think We weren’t ready before.”

“Right now we are discussing with some operators in the US about a possible launch of future products there,” said the Sino-Swiss entrepreneur.

like apple and Samsung There are already established relationships with the big U.S. airlines, making it harder for smaller players to compete.

But Pei added that one-third of sales of its recently launched Ear (stick-shaped) headphones now come from the United States.

“It’s definitely a market that already has a lot of interest in our products. If we launch smartphones there, I believe we can grow significantly,” he said.

The company expects its revenue to grow more than tenfold by 2022 — from about $20 million in 2021 to about $250 million this year, according to data shared exclusively with CNBC. Its workforce has also more than doubled to more than 400. However, the company is still losing money.

“The goal is to become profitable in 2024,” Pei said. “We’re not profitable right now. It’s been more difficult this year because of foreign exchange. We pay a lot of COGS [cost of goods sold] Dollars, but we make money in pounds, euros, Indian rupees – so everything is devalued against the dollar. “

The dollar has risen this year; this dollar index – which measures the greenback against a basket of major currencies – is up more than 8.5 percent so far this year.

Pei wants to challenge Apple’s iPhone in the US, but it’s a steep hill.

“Android has its challenges and iOS is becoming more and more dominant. They have a strong lock-in relationship with iMessage and AirDrop, especially among Gen Z. So that’s increasingly worrisome to me,” he said. Say.

“There may have been a time when Apple had 80 percent of the market, and that didn’t leave enough room for Android-based manufacturers to continue to compete,” he said.

Apple had no immediate comment when contacted by CNBC.

Pei said he has sympathy for Elon Musk, who, as Twitter’s new chief executive, has put pressure on Apple over App Store restrictions and a 30% fee on in-app purchases.

In a few years, Nothing may need to “take a hard look at this problem and how we can solve it,” he added.

“This will create a ceiling for our growth,” Pei said.

Bay said his company faced many challenges in bringing the product to market. One of the major setbacks it faced was its approach to Foxconn, Apple’s largest iPhone supplier, to make phones for it.

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

“Every start-up manufacturer has worked with Foxconn,” Pei said. “But when it was our turn, they said no because every startup they worked with failed. Every time a startup fails, Foxconn loses money and they can’t recoup their costs.”

Foxconn had no immediate comment when contacted by CNBC.

Covid restrictions around the world have also created significant hurdles for the company. In India, where Nothing makes phones, travel restrictions have prevented the company from sending engineers, and Pei said the company must manage its factories on the ground remotely.

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

In Shenzhen, China, where officials imposed strict lockdown measures, Nothing’s engineers were given a 45-minute allotted time to discuss component designs and mechanics while people were allowed to go out and shop.

To date, no product has sold more than 1 million units worldwide, with 600,000 Ear (1) earbuds and 500,000 Phone (1) units sold.

Still, the startup is small, and it faces a bleak economic outlook that has forced people to curb spending significantly.

In Europe, third-quarter smartphone shipments fell 16% year-over-year, although they rose slightly from the previous quarter due to the strong launch of the iPhone 14.

Samsung is the largest smartphone maker in Europe with a 35 percent market share, followed by China’s Xiaomi with 23 percent and Apple with 21 percent.