A consumer electronics start-up called Nothing has secured more than $200 million in funding to launch its first smartphone, in a newcomer’s first attempt in several years to break into a market dominated by Apple and Samsung.
Nothing will reveal the design of its first smartphone, called Phone (1), on Wednesday before it goes on general sale this summer. The device has a transparent back, revealing electronic components such as a wireless charging coil that are normally hidden, and runs on the Android operating system.
The company’s backers include Alphabet’s venture capital arm, EQT Ventures and former Apple designer Tony Fadell. They are betting Carl Pei, the chief executive of Nothing, who previously co-founded Chinese smartphone brand OnePlus, can succeed where even Andy Rubin, the co-founder of the Android mobile operating system, failed.
Rubin’s startup Essential raised $330 million but shut down in 2020 after its 2017 smartphone launch sold fewer than 100,000 units in its first six months, according to estimates by Rubin. the research company IDC at the time.
“I come from a very hardware-centric background and he comes from a very software-centric background,” Pei said of Rubin in an interview with the Financial Times. “People with more credibility than me have tried and failed. . . They underestimated the complexity of this industry.
After several years of most smartphones resembling Apple’s iPhone designs, Pei said, “people are yearning for something new.”
After the failure of start-ups such as Essential trying to come up with more innovative designs, the smartphone market has become concentrated.
According to Counterpoint market research, just four companies accounted for almost three-quarters of the 1.4 billion smartphones sold worldwide last year.
Pei’s previous venture, OnePlus, is part of China’s BBK Electronics, which has become the world’s fourth-largest smartphone player alongside Apple, Samsung and Xiaomi, across a range of brands including Oppo, Vivo and Realme. .
This focus has made launching a new handset even more difficult in recent years, Pei admitted. Manufacturers are more reluctant to work with newcomers after being burned by poor sales from previous start-ups. Obtaining components, many of which are already limited in the industry, is more difficult for new entrants with lower volumes.
Last year, Nothing initially ordered around 700,000 screens for its first series of Phone (1), but was able to increase that order after raising more capital and boosting distributor confidence with the launch last year of its first product, a pair of wireless headphones that sport the same transparent casing as its next phone. Nothing has shipped 530,000 units of Ear(1) since the device went on general sale last August.
It helped “prove to the market that this team can not only design a really beautiful product, but also manufacture and sell it on a massive scale,” Pei said. “Using this point of proof, we collected more money to be able to build a smartphone. And if the smartphone works well afterwards, we can collect more money to do the next thing we want to do.
Nothing has raised $144 million in equity and has a $65 million revolving line of credit from its business partners. The company is working with O2 in the UK, Deutsche Telekom in Germany and Flipkart in India to distribute the phone when it launches, with ambitions to eventually launch in the US if Phone (1) sells well.
With 330 employees, Nothing manages its supply chain and hardware from Shenzhen, China, with design and marketing teams in Europe and other teams in India, Taiwan and California. The intellectual property behind its products is owned in the UK.
“A lot of Android makers just take market share from each other and don’t do anything very different to even try to take share from Apple,” Pei said. “I think the outcome of this product is that we will convert more iPhone users than other Android phones.”
As for Essential, some of its ideas could have a second life with Phone (1). Last year, Nothing acquired some of its intellectual property assets.
This article has been updated to remove an incorrect reference to Qualcomm as an investor in Nothing