The Nothing Phone 1 is Carl Pei's first move in trying to shake up the smartphone since leaving OnePlus. Will it work?
South China Morning Post
9 min read
Two years after Carl Pei left OnePlus, the buzzy smartphone brand he co-founded with Pete Lau in Shenzhen in 2013, the entrepreneur is set to launch a new smartphone with his new company Nothing, all from a new location.
"London is a great location because there's so much talent here, especially in the financial services sector," Pei said in a video call with the South China Morning Post on June 29. "I mean, we need funding also to grow this company when it comes to design talent, marketing talent, branding talent."
As Pei prepares to launch the Nothing Phone 1 - stylised as "phone (1)" - much of what he has to say about his new company is focused on the practical reality of building a start-up. It takes a lot of money and time to build a company into something that can capture the public's imagination, especially in an industry as competitive as smartphones.
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The Nothing Phone 1 uses a transparent back, in line with design language used with the Ear 1 wireless earbuds, the company's first product released last year. Photo: Nothing alt=The Nothing Phone 1 uses a transparent back, in line with design language used with the Ear 1 wireless earbuds, the company's first product released last year. Photo: Nothing>
With the Phone 1, which launches on July 12, Pei is operating in a drastically different landscape than what existed in the market when the OnePlus One launched in 2014. At that time, the smartphone market was still growing quickly. The Android ecosystem was also highly fragmented and playing catch-up with the iPhone. OnePlus took advantage of this with slick marketing promising to "never settle", undercutting the competition drastically on price for high-end hardware.
Today, Pei is once again launching a phone from an unproven brand, but there is less to disrupt. There are many good Android phones to choose from, and the software experience is more similar than ever thanks to Google's efforts to streamline the experience across devices. Moreover, 15 years after the launch of the first iPhone, the smartphone market is saturated and in decline. Smartphone shipments were down 10 per cent year on year in May to 96 million units, according to Counterpoint Research.
Does any of this concern Pei? Not by his telling.
"I know why the market is shrinking: because there's no reason for consumers to buy the product," Pei said, blaming fewer changes and less innovation between smartphone models.
Pei also pointed out that a market downturn is less likely to negatively affect his company than a large brand with 10 to 20 per cent market share.
In some ways, this pragmatic attitude reflects another change for Pei, who had become known during his time at OnePlus for soaring marketing rhetoric for each new device. Today, Pei is more up front about his strategy of trying to build a brand that can last long enough to become truly disruptive. When asked about emergent technologies like virtual reality, Pei demurred.
"The smartphone will dominate our digital lives for the next five to 10 years," he said. "There's been so much hype about alternative form factors, and none of it has really panned out."
Pei said Nothing had a choice between taking a big risk on potentially disruptive technology - "the likely scenario is that we go bankrupt" - or to "let other people take the risk first" and iterate on top of something that already exists. "Once you wedge yourself in," Pei said, "then you can start investing in these projects that may or may not succeed."
Nothing's first product was the Ear 1 wireless earbuds, featuring a distinctive semi-transparent design, which has shipped more than 560,000 units, according to the company. "I think that proof point was what allowed us to really get the resources we need to build a smartphone," Pei said.
That design language is carried over to the Phone 1, the back of which is covered with what the company calls the "Glyph Interface", a series of LED lights in the shape of a made up symbol.
The Glyph Interface, as Nothing calls it, is a series of LED lights on the back of the Phone 1, which flash in different patterns to notify users about incoming messages, phone calls, battery charging status and more. Photo: Nothing alt=The Glyph Interface, as Nothing calls it, is a series of LED lights on the back of the Phone 1, which flash in different patterns to notify users about incoming messages, phone calls, battery charging status and more. Photo: Nothing>
While the lights have some functionality, like flashing in different patterns when users have notifications or a phone call, its primary purpose is to give it a unique visual design that stands out from the crowd.
Pei said Nothing sought to give the phone a timeless design, which meant eschewing design language that was already popular today. Most smartphones do not stand out from the crowd, according to Pei, because they are relying on a trend set by Apple. "Whatever Apple does, everybody does," Pei said. "So by staying close to the Apple design language, you're actually dating yourself to specific points in time."
Other elements of the phone are less inspiring. It ships with a Qualcomm Snapdragon 778G+, a mid-tier 6-nanometre chip that will keep it from going head-to-head with top-tier phones like Samsung's Galaxy S22 and Google's Pixel 6 in benchmark tests. But it is also expected to come in at a more reasonable price, which feels right out of the Carl Pei playbook.
With its focus on design, though, Nothing is also trying to attract the creative community, similar to what Apple achieved.
"Once [Apple] became associated with creativity, it made regular consumers want to purchase and be a part of that," Pei said. "Fifteen years ago, if you sat in a cafe using a MacBook, you felt like you were special or different. But today ... even private equity guys are using Mac computers."
Pei said "some of the biggest musicians and fashion designers in the world" have invested in Nothing. Last year, Axel Christofer Hedfors and Sebastian Ingrosso, members of the music group Swedish House Mafia, took part in a US$50 million funding round for Nothing. To date, Nothing has raised a total of US$144 million.
Pei is also drawing inspiration from Apple in another area: "We're trying to build an alternative to the Apple ecosystem, because the current options on the market are not really satisfying the needs of the consumer," he said. "We don't see ourselves as a smartphone company, and I don't believe that we're at the end of innovation for our category."
In this, though, Nothing is not unique. Android rivals Google and Samsung want the same thing and have a lot more resources. Samsung makes everything from laptops to home appliances, while Google's Nest is one of the largest smart home brands and its Chromebooks are now a staple of the US education system.
Nothing, meanwhile, must rely on third-party devices. Pei pointed to the inclusion of controls for Tesla vehicles, which is not part of an official partnership but is included because of what the company sees as "a big overlap between Tesla fans and potential Nothing fans".
"We admire [Xiaomi founder and CEO] Lei Jun as an entrepreneur and what he's accomplished. But I think one-and-a-half years in, we're on a very different path," he said. "I think we are much more design-led and brand-led and creativity-led. I don't really see too many similarities."
Nothing OS takes a clean approach to Android, similar to the light touch that Carl Pei took at OnePlus, keeping Google apps and favouring minimal modifications. Photo: Nothing alt=Nothing OS takes a clean approach to Android, similar to the light touch that Carl Pei took at OnePlus, keeping Google apps and favouring minimal modifications. Photo: Nothing>
Nothing is also distinct from many of the world's top Android handset makers by not being based in China, but it does have a team there. A Nothing spokeswoman based in Shenzhen said the local team has about 200 people. This makes up most the company's 300 staff members, but Pei said having operations spread across five countries allows Nothing to go wherever the talent is.
The UK has design and financing, Sweden is a "creative hub" and China has the hardware engineering and supply chain. The company is also doing some manufacturing in India, which has incentivised local smartphone production, and is working with music talent in Los Angeles. Nothing is building a team in Taipei, as well, and exploring options in Vietnam, Pei said.
Even when based in Shenzhen, Pei had a more international focus than Chinese smartphone entrepreneurs. Pei grew up in Sweden, so moving to London brings him back to the continent where he spent much of his life.
It also allowed Nothing to tap into the UK's talent base. One of the company's biggest hires was Adam Bates, who was previously head of design at Dyson. "I genuinely believe we have one of the world's best industrial design teams," Pei said.
OnePlus also catered heavily to international consumers, with a light touch to Android modification that did not help it gain much traction at home. The only place in China where OnePlus was able to get a foothold was Hong Kong, where Pei said he is now seeing a surprising amount of interest in the Nothing Phone 1.
"I think we're going to make waves in the Hong Kong market again," Pei said. "CSL has a great package that they're launching with our product. I guess what we're doing is really speaking to the Hong Kong consumer."
For now, though, the Phone 1 must rely on building momentum without launching in two of the world's most important smartphone markets: China and the US. Pei said Nothing will eventually release smartphones in the US, but he is waiting for the right opportunity with a telecoms carrier in the country.
Still, Nothing has been generating a considerable amount of attention online. This could be because Pei has kept many of the fans he made at OnePlus. Pei's unique brand of hype marketing might also be paying off: telling people you're making something that is going to be better in some way than anything else on the market can get people talking about it out of sheer interest in finding out whether it is true.
For Pei, this is a gamble. If people really love the Phone 1, Nothing generates enough revenue to move on to the next thing and spend more on innovating new features. If the venture does not pan out, Nothing could go the way of Nextbit, which was bought by Razer after its Robin phone did not meet lofty expectations, or Essential, the smartphone company created by Android co-founder Andy Rubin in 2017 that has already faded into obscurity. Nothing acquired Essential's intellectual property early last year.
But when all the details of the Phone 1 are finally available to the public on Tuesday, one question will remain: Is it enough for a smartphone in 2022 to just look different?
"I think now we just need to prove ourselves that it's going to be a great product," Pei said, "and [that we can] ship enough quantity to give our supply chain partners or investors conviction that this can become something meaningful over time."
