Nothing Phone (1) is best not to be launched in the US

Yesterday, Nothing announced that its upcoming Nothing Phone (1) would not be launched in the United States. There were many people in the tech community who were outraged that Nothing had marketed their device so much in the US that they turned around and ignored it on their first major launch of the device. While it might seem like a betrayal or that Nothing is ignoring millions of tech enthusiasts in the US, it makes sense that they don’t throw the phone (1) here. Let me explain.

Brand loyalty is a huge business

Look, brand loyalty is one of the largest product sellers in the world, both in and out of technology. In 2019, 90.2% of consumers said they are loyal to a brand, this is especially true when it comes to the tech market in the United States. Customers who use Samsung, Apple, and Google products are more than likely to continue to buy from that company, and it’s extremely difficult to break that loyalty. Most of this is beyond Nothing’s control. Even if they did, the customer acquisition cost (CAC) would likely be incredibly high, which is not worth the marketing spend.

Even looking at Nothing on a technical level, the Phone (1) offers no meaning new features or specifications to make it worth switching to a consumer. It is a ~ $ 500 phone with a mid-range processor with a medium display, dual cameras and a boring design, outside the LEDs on the back which will only be covered by one case. The device offers nothing that will create FOMO (fear of getting lost) in customers or features that make an ecosystem abandonment current and probably already heavily invested in the ecosystem. Brand loyalty from Samsung, Apple and Google is too strong and Nothing offers, well, nothing.

Nothing can compete with Google, Samsung and Apple without operators

There’s no room at handlers for the Nothing Phone (1) right now – it’s another $ 500 phone that doesn’t really bring to the table outside of an unusual design. There are many better phones in that price range on the US market that carriers already sell from much bigger players. Nothing would ever be able to afford or manage sales reps for courier stores on the scale of Apple, Samsung or Google to train store employees.

You may be wondering why I’m focusing specifically on vectors. Well, that’s because that’s what constitutes the US market.

According to the research group NPD Connected Intelligence, 50.1 million active unlocked smartphones were used in 2020 in the United States. That number of phones is only 17% of the total 294.15 million active smartphones in the United States. There is no point in focusing on the minority who are probably most reluctant to buy a device, because they are not obligated to do so by contracts and payment plans.

Those other 244 million devices would be blocked and sold via couriers, likely with payment plans that are subsidizing the costs of the devices. This allows for large financing deals that keep you in touch with the carrier and device, but also allows you to spread out the price of a $ 1000 phone in payments of $ 24 a month for 36 months with an advance of $ 150, the now standard term for financing a US telephone operator deal. With the average selling price of a 5G phone in the US most recently at $ 815, a $ 500 phone doesn’t seem to fit the market.

A $ 300 phone that can be given away as a promotion with a trade-in or new line would be fine for carriers, as would a $ 1000 phone that can be funded. A $ 500 finance plan doesn’t make much sense when the difference between that and the $ 1000 funded is around $ 10 per month (as $ 500 phones usually don’t have a down payment).

Meanwhile, even spending $ 500 in cash doesn’t make sense when the Pixel 6, a well-marketed device with a better camera and processor from one brand, costs $ 600 and is likely discounted off of the operator’s subsidy. The Nothing Phone (1) is a phone without a place in a market that is probably not willing to accept it.

Ignoring the managers, if Nothing wanted to sell their unlocked device and offer their financing to sell the phone (1) via their website, it would be necessary to find a bank willing to handle the financing. Banks like TD Bank are the ones that handle financing for companies like Samsung on Samsung’s financial plans, not Samsung itself. In an unstable market, banks are probably unwilling to partner with startups to finance consumer devices like this one. Without the carriers subsidizing the phone, nothing is unlikely to see massive sales.

To reach the US market in a meaningful way, Nothing would need neither a single flagship nor a very cheap device on a US carrier. The Nothing Phone (1) is none of those and realistically could never enter courier shops right now.

Launching on carriers would cost too much

Let’s put it simply: it costs a lot to launch phones in the United States.

A Samsung phone on T-Mobile, for example, has 38 cellular bands (35 without mmWave), along with Wi-Fi, Bluetooth, wireless switching, and NFC, all of which the Nothing Phone has (1). All of these need to be FCC tested and approved, which can be incredibly expensive. Without this test it is illegal to sell a device in the United States. If the device does not meet FCC standards, this could mean weeks or months of follow-up engineering to get the device to work to US standards, which becomes expensive.

The FCC test itself is not that expensive, but the UL certification of the battery and carrier is. UL battery certification, which verifies that the battery meets a nationally recognized safety standard, is optional but nearly required in the United States and can cost tens of thousands of dollars. Carrier certification, on the other hand, will cost millions. If the phone were to include mmWave as well, that would require Qualcomm’s mmWave certification and also licenses for mmWave patents, which can go up to seven digits. All in all, it can be incredibly expensive

There is also carrier certification. Manufacturers like Nothing would need to send devices to operators like T-Mobile, AT&T and Verizon and have them tested on their networks. This is not just to be sold on those networks, but to use the full access of the networks. If the phone (1) does not meet one of the carriers’ standards, this would require Nothing to repair the phone and send it back for testing. Not only would it take weeks, but it would delay software updates, like what we see with Samsung phones. Without that operator certification, you wouldn’t be able to use Voice over LTE on AT&T, plus no 5G services, spotty (if any) on T-Mobile, and no services on Verizon.

Nothing is a startup, whether they like it or not

With all the hype about Nothing, it might not seem like it, but the company is a startup.

Nothing lacks the backing of a billion dollar multinational like Xiaomi or OPPO if they need financing or parts. This means it must have investors and bank financing. This means debts, loans and huge lines of credit.

Nothing, unlike most businesses, can’t afford a phone to fail in a market. To be able to repay these debts, he cannot afford bankruptcy: spending millions of dollars not repaying them is simply not sustainable.

There are also ongoing costs after the device is launched, which includes paying for operator certification with each upgrade it attempts to push. When doing monthly security updates, it’s a monthly expense that’s only worth it if it sells well. If it’s not, it’s just burning money. You may be thinking, “Well, if it doesn’t sell well, cut your losses and stop with the US updates.” It’s even worse, because it means bad press from all the major tech news outlets and YouTubers until Nothing agrees to burn more money and probably burn bridges with customers as well. Just look at the situation Qualcomm found itself in recently with its Snapdragon Insiders phone.

Beyond that, Nothing would need a US support line for customer service, a repair program for broken products, a system for making warranty claims for devices, a distribution network for shipping devices, warehouses for store products and more that i didn’t list. These are all investments that make no sense in a market where the phone is doomed to fail.

After this news on Nothing Phone (1) didn’t roll out in the US, I’ve seen a few Twitter users saying something like, “If you don’t try you can’t succeed.” Frankly, this doesn’t work for startups when it comes to risking millions of dollars. Failure of this product could mean they are unable to invest as much in future products, future growth or support.

Do you think Nothing will ever launch a phone in the US?

I wouldn’t be shocked if Nothing took the time to launch in the US – I might see them wait two or three generations before they have a true flagship product. A true flagship device developed in-house with a cost of the order of $ 100 million; they can’t just pool more than $ 100 million in funding and investors to create such a project, because it would likely fail without any brand loyalty or track record. It will take time.

If and when nothing ends up making it, nothing could make a great phone for the United States, but that time isn’t now. Instead, nothing will create a device that they know will appeal to everyone in markets where it is cheaper to enter.

It’s all right if Nothing can gain a few more generations and release a few more devices, then we might get what we tech-lovers want. Until then, however, it takes a little patience. Nothing knows what they are doing; I trust they will make the right decisions along the way.

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