Where Apple and Google fall short
Why it’s so hard to innovate in a market dominated by Apple, Google, and Samsung
Why the most exciting smartphone innovations aren’t coming from the usual suspects.
According to Andy Rubin, the modern mobile ecosystem is broken. He should know: He helped break it.
When Rubin, the inventor of the Android operating system and godfather of the smartphone market, surveys the industry today, he sees squandered opportunities everywhere. The open-source platform he brought to the masses while at Google, which commands roughly 85% of the market, is overwhelmed with “bad user experiences,” he says. Devices from makers such as
LG and Huawei are uninspired. Samsung has been too often content with fast following: “Who at Samsung is responsible for your device’s look and UI? It’s a nameless, faceless machine.” And Apple? “The world’s biggest and most successful company doesn’t have a human side to it,” Rubin argues. “The incumbents have lost track of why they exist, why they’re building products, and what they mean in people’s lives.”
From consumers and tech insiders, you hear similar complaints: Why can’t new mobile devices deliver the excitement they once did? The breathtaking leaps? The culture-shifting impact? Instead we’ve settled into a schedule of incremental rollouts. In the U.S., the market is dominated by duopolies—apple and Samsung in hardware, and IOS and Android (which account for all but 0.4% of smartphone sales) in platform. And then there are the four big carriers, lording over retail distribution channels with their outsize marketing budgets and multiyear contracts. These dynamics have stifled innovation, critics say, with the giants focused on holding their leads and other makers churning out cheap devices to avoid becoming rounding errors. This is why early adopters often have to hunt for devices from lesser-known companies to experience the latest specs. And why American consumers have had to wait until this fall to get an edge-to-edge screen on an Apple phone, a full year after such displays began showing up in the Chinese market.
One of the biggest challenges for device makers in the U.S. is scale. When you’re expected to sell hundreds of millions of units, your appetite for taking hardware risks changes substantially, says Tony Fadell, who helped pioneer the ipod and iphone at Apple and went on to found Nest. “[The Apples and Samsungs] have to innovate more cautiously,” Fadell says, “because they don’t want to lose market share or trip up their revenue, which can be disastrous, as we saw when Samsung fouled up.” There’s simply less urgency to innovate at the top: According to one report, Apple swallowed up 104% of all smartphone profits one quarter last year (a figure made technically possible by its competitors’ losses).
There are pockets of disruption, even among the big guns (see “Breaking the Mold,” right). Google’s Pixel phones offer the sleekest implementation yet of Android. Apple is reportedly experimenting with an ultra-high-end handset that contains more new features than the company has introduced in years.
Rubin himself isn’t just sniping at these issues from the sidelines. Three years after leaving Google—where he spent a decade—the 54-year-old engineer turned entrepreneur has designed the device he always wanted through his new startup, Essential. Called simply the Essential Phone, the $699 device is a stripped-down, carrier-agnostic handset with a titanium shell, a ceramic casing that enhances wireless signals, and a snap-on 360-degree camera (which Rubin hopes will seed a whole ecosystem of attachable accessories).
Of course, designing a hot product and making it a hit that can shake up a multibillion-dollar marketplace are two very different tasks. As the Essential Phone hits shelves this fall, it is a bellwether for when—and if— innovation might finally re-emerge in the U.S. mobile market.
If you want to see a landscape where mobile is thriving, look to China, where companies from Beijing to Shenzhen are producing some of the most innovative devices and services. In this environment, Samsung and Apple can’t rely on sheer scale to sustain their leads. And little-known names can triumph seemingly overnight. BBK subsidiary Oppo saw its market share grow 122% last year, propelling it from fourth place in the industry to the No. 1 slot.
To survive in this fast-moving market, Chinese companies have become increasingly experimental. Facebook VR head Hugo Barra, who formerly ran Xiaomi’s international business, says that hardware startups in China constantly take advantage of their proximity to Asian manufacturers to pounce on cutting-edge tech, from the Xiaomi Mi Mix’s near-bezel-less display to the Vivo V5’s groundbreaking 20-megapixel camera.
It’s not that Apple is unaware of the advances these nimbler players are making; it’s simply that, at Apple’s size, its suppliers can’t keep up with demand. “When you’re Samsung or Apple and you’re selling tens of millions of units, you need to procure almost everything—screens, processors, whatever—many, many months ahead so suppliers can ramp up,” says Barra. Companies operating at a smaller volume can land new components 6 to 12 months earlier— and that’s especially true for a startup headed by Rubin, an industry “demigod,” according to Barra.
You can see that phenomenon in Essential Phone’s attachable 360-degree camera (which requires no app or software and can seamlessly transfer data) and its titanium body: a thin, resilient material that enables the phone to pack in enough antennas to work in every country, regardless of carrier. “[Our product-architecture head] Jason Keats found this small supplier in Germany that does this totally new process for titanium injection molding,” Rubin says. “They told us Apple was there a month ago
“The incumbents have lost track of why they exist, why they’re building products, and what they mean in people’s lives,” Rubin says.
and wanted to partner, but [Apple] needed like 200 million units. They were like, ‘There’s no way we could supply that!’ ”
Essential’s mission is not just to pioneer new hardware. It also wants to unlock the next phase of platform innovation—at a time when smartphones have become the remote controls for our lives. Hardware and services that revolve around the phone are multiplying, especially in the home. Yet they’re hampered by big companies’ urge to own those ecosystems.
Apple, with Homekit, wants to treat your home like another iosbased platform, with your smart refrigerator and microwave resembling the apps currently on your iphone. Google, with its acquisition of Nest, aims to establish an edge by rolling out mass-market home products— thermostats, smoke alarms, security cameras—that connect to your phone. And companies from Amazon to Xiaomi are pushing their own strategies to become the industry leaders in the smart-home space. This is Rubin’s preoccupation as well. “I can’t not be in the phone business and solve the other problems,” he says, “because all of the stuff in your life—the home, the car, the office—orbit around the main screen in your life.”
Instead of owning the home, though, Rubin wants to empower it. Thus, his next release isn’t another Android-based phone—it’s another Android. Called Ambient OS, it is a similarly spongy platform engineered to hum invisibly in the background and allow fragmented products and services to coordinate seamlessly. “Right now, to just unlock your door and turn on the lights, you need to launch three apps,” Rubin says. “I want [Ambient] to rise above all the other products in your home and provide a holistic user experience that bridges all the islands.” The first product built on this platform is the Essential Home, an Amazon Echo–like speaker, but the vision is to enable all your gadgets—whether Samsung TVS, Google Nest thermostats, Macbooks and ipads, or, yes, Essential Phones—to communicate.
While many observers are bullish on Rubin’s efforts—especially the investors, including Tencent and Amazon, who have plowed $300 million into his startup—not everyone is a believer. “Neither [Rubin] nor the new Essential brand is known beyond the high-tech media and analyst communities,” says mobile analyst Thomas Husson, of Forrester Research. Rubin, naturally, is aware of the stakes of the absurdly large bet he’s making: “Come on! There’s like 10,000 things that could go wrong!” he says. “We’re in a hits business. If we fail to make a hit, we’re not going to Motown.”
This kind of risk-taking spirit is exactly what the bigger players lack. And Rubin sees opportunity in their complacency. But even if Essential’s only success is forcing the incumbents to move faster and innovate again, he will have taken a step toward reinvigorating the mobile ecosystem he helped create.
If you want to see a landscape where mobile is thriving, look to China, where companies from Beijing to Shenzhen are producing some of the most innovative devices and services.