phone (1) launch: much ado about Nothing

This afternoon, the latest smartphone brand will launch in selected markets across Europe, the Middle East and Asia. The Nothing phone (1), spearheaded by OnePlus co-founder Carl Pei, promises to “remove barriers between people and technology to create a seamless digital future.”

As a UK-based company, Europe will be one of Nothing’s key target markets. But Europe is a notoriously difficult market to crack, so what are Nothing’s chances of success?

The phone

Let’s get something clear straight away…I don’t like the name. There, I’ve said it. I personally think it’s a bit awkward! Nothing phone (1), especially with the brackets, doesn’t flow well, and tends to require further explanation to make someone understand what you are talking about. Even telling colleagues that I was “writing an article about Nothing” was met by initial confusion. It also lends itself a bit too easily to wordplay and puns (as you may notice throughout this article).

The next issue is that the Nothing brand is largely unknown. There is a lot of hype amongst enthusiasts, but Carl Pei is not a household name outside of the tech community. Nothing’s first and only other product, the ear (1) TWS earbuds, has done ok (just under a million units sold globally so far), but this is still leagues behind the market leader Apple that sold 17 million AirPods in Q1 2022 alone. Nothing will therefore need to focus on raising awareness of the brand to grow visibility in the mass market.

To this end, Nothing seems to be trying to do an Apple-esque job with its marketing, and has managed to ratchet up the hype by largely doing nothing (excuse the pun). The problem is that it doesn’t yet have the clout to back it up, and the device certainly isn’t as premium as an iPhone. Overall, the phone is shaping up to be a solid mid-range device; nothing more, nothing less (there’s another one for you).

On the plus side though, it helps that Nothing is a UK-startup (homegrown companies are always well received, especially with the recent rapid growth of the relatively new Chinese vendors), plus its ecosystem approach, including the ability to integrate products from other brands more smoothly, is intriguing.

Nothing is also trying to make the design the differentiating factor. The see-through case and LED lighting is pretty cool and unique, but will this be enough? The UI and overall experience will be vital to grow mindshare and get phone (1) to stand out from the crowd. And there’s a big crowd indeed.

The competition

Europe has seen a mass influx of new smartphone brands over the last few years, with the likes of Xiaomi, OPPO, realme and vivo all launching in the region to try to capitalise on Huawei’s exit. Huawei offshoot HONOR is also now making a play as an independent brand, and then of course we have incumbents Samsung, Apple, Nokia, Motorola and Google rounding out the field.

Xiaomi has lost a bit of ground since its peak in mid-2021, but it looks to have largely recovered from supply issues, while OPPO, realme, HONOR and vivo are all growing steadily. Even Motorola and Nokia HMD are seeing a bit of a resurgence in recent years.

Western Europe is a very crowded market

Source: Counterpoint Research Market Pulse

The strategy

While there isn’t really an ideal number of vendors, this does make for a very crowded market. However, Nothing has one important advantage: the operators. The operators are a key channel in Europe, and vendors that rely on a direct or online-only approach will always have limited growth prospects. Nothing, meanwhile, has forged partnerships with operators O2 in the UK and Deutsche Telekom in Germany, which will give it an edge over some vendors.

Then there is Nothing’s ‘invite-only’ model. OnePlus found moderate success with this approach in its early days, and Nothing will likely follow a similar trajectory: a cool thing for those in the know, but very niche. Yes, with OnePlus struggling somewhat at the moment, Nothing could potentially capitalise and grab share within the tech-savvy community. But sales will always be limited without mass market availability.

Lastly is the issue of timing. The current economic conditions in Europe are dire, with record inflation levels severely impacting consumer spending. Even if the phone (1) is pitched as an affordable iPhone challenger, many consumers may wait until the macro environment settles down before taking a chance on something new, however affordable it may be. This could leave the high-profile launch as a hiding to nothing (these puns are hard to resist).

The prospects

With a brand new, largely untested product (including the new Nothing OS software that may need to go through multiple updates to get everything ironed out) and stiff competition from numerous Chinese vendors, not to mention Samsung and Apple, Nothing has its work cut out. It may make a bit of a splash initially, but it will take time to gain momentum.

OnePlus reached 5% of smartphone sales in Western Europe at its peak in August 2021, so anything close to that would be a big success for Nothing. But it will likely take a number of years, launches in many more markets (especially France, Italy and Spain) and multiple iterations of the product to reach this level. For the latter, the post-purchase experience and customer feedback will be critical. But with Carl Pei at the helm though, anything is possible. So here goes Nothing (sorry).

Jan is an Associate Director with Counterpoint Research, based in London, and leads the company’s research in Europe. He is a seasoned analyst with over 13 years’ experience in the TMT sector, most recently with GSMA Intelligence where he was responsible for key research deliverables and led a team of analysts producing highly impactful regional insights. Before that, Jan held strategy and analyst positions at Vodafone and Qualcomm, and started his career with research firm TNS (now Kantar).

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