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Comment by Analemma_ | Hacker News Reader

I said this in another thread about the Essential Phone, but I'll say it again: their strategy was 100% bass-ackwards. You can't come in at the high end of the market: that's where the big dogs live with huge advertising budgets, carrier buy-in, and solid R&D for great cameras. You can't compete with that starting from scratch.

You have to be like OnePlus and the other Chinese manufacturers: start by offering a good phone at a good price that undercuts Apple and Samsung's stupidly expensive flagships, then gradually work your way up-market. That kind of disruption strategy is the only way to break into smartphones.

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I would argue that the _only_ way you can come in to the phone market is through the high end.

In order to sell at the low end, you need to sell a lot. A new company doesn't have the market share to make a low end phone with almost no margin profitable in any reasonable amount of time.

On top of which, people with the money to buy high end phones are the ones with the money to throw away their perfectly fine phone in order to get the latest and greatest toys, and the ones that want to do so so they can brag that they have this cool phone that not that many people know about.

The main problem was not the price, it was the execution. False promises, late releases, poor support, general lack of transparency. The execution was abysmal, but people were willing to pay the price.

You are assuming "low end" means "undifferentiated and low-margin".

That's because it does. You're competing with other OEMs that all have razor thin margins.

> False promises, late releases, poor support, general lack of transparency.

These aren't a problem at the low end; at the low end, you sell someone a phone for $100, and they get what they get, and you're done.

Where you can differentiate on the low end, as an Android founder, is building something where you put out a new phone every year, but everything is on the same / close enough to the same / software platform, so your quarterly (or whenever) software updates apply equally to all your devices. Get about $20-$50 spendier each phone you make, and by the time you're at the high end, you've earned a reputation for quality phones with frequent software upgrades, and people will pay the premium for your phones.

OTOH, premium phones on firesale clearance works pretty well for me. Fire phone, Nextbit Robin, etc.

I disagree with this. By starting at the low-end, you will never be able to "out-cost" cheap Chinese manufacturers, with their economies of scale. Across all industries - (Apple with the original iPhone, Tesla with the Model S, etc.), the hardware startup value proposition is in the high-end.

You have to create a sustainable, innovative value proposition. That's easier for a startup to do (much harder for a big company to take a "leap"). Essential thought they had one with their "camera" system, but it didn't catch on.

This misunderstands the problem...

Carriers are the main distribution channel for phones. You can’t compete with carrier distro.

I said that in my comment? Carriers control visibility for big, flagship phones, but the Chinese manufacturers still manage to sell decently by marketing their cheaper phones directly to consumers. That's the kind of strategy Essential should have emulated, until they got big enough to start cutting deals with carriers.

again, I don't see how you can draw a comparison between cheap Chinese manufacturers and an SV backed startup. Can you imagine the VC pitch for that? "We want to raise capital so we can make low-margin phones and that Chinese manufacturers can easily undercut".

Chinese manufacturers have more capital and have easier ways to monetize than a small startup. For that matter, Name a Cheap Chinese manufacturer that has been able to break through in the US market? No chinese phone manufacturer has more than 8% of the market in the US.

Essential took their shot at trying to make a value-chain leap. They failed. That's okay. Life moves on, their engineers will be okay, and they'll get more opportunities in the future - but at least they took their shot.

Well, that's what OnePlus did, and it seems to have done fine.

OnePlus is also increasing the price of their phone with each new version and they don't want to be perceived as a cheap brand.

For example, in Canada, the latest Oneplus 6 cost $699 CAD. That's not cheap. Sure, iPhones and Galaxys are more expensive, but I don't know a lot of people who are ready to drop $700 on a phone from a internet-only brand.

They were partnered with Sprint, clearly it just wasn't enough. I think they simply weren't different enough to convince people to leave the more trusted brands. Smart phones have reached that stage of maturity where the new generations offer little change over the older and the market is accordingly reaching a sort of stasis/equilibrium.

Sprint is also the worst carrier to partner with. People buying flagship phones aren't upgrading their on Sprint, they're switching to other networks.

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