With Phone (1), Nothing hopes to succeed where Essential failed

A consumer-electronics startup called Nothing has secured financing of more than $200 million to launch its debut smartphone, in the first attempt by a newcomer to crack a market dominated by Apple and SAMSUNG.

The design of its first phone, called Phone, won't be made public until this summer. A wireless charging coil that is normally hidden is visible on the transparent back of the device.

The company is backed by a number of people, including a former Apple designer. They are betting that Carl Pei, Nothing's chief executive, can succeed where Andy Rubin failed.

Rubin’s start-up 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 research firm IDC at the time.

Pei said in an interview with the Financial Times that Rubin came from a software background. They have more credibility than I have. The industry is complex.

Pei said that people are looking for something new after several years where most phones have looked the same.

The failure of start-ups such as Essential has made the market more concentrated.

According to Counterpoint, only four companies accounted for more than three-quarters of the global market for phones.

Pei's previous venture, OnePlus, is part of China-basedBBK Electronics, which has become the fourth-biggest smartphone player alongside Apple,Samsung andXiaomi, through a range of brands.

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Launching a new phone has become more difficult in recent years. Low sales of earlier start-ups have made manufacturers hesitant to work with newcomers. It is more difficult for new entrants with lower volumes to get components.

Last year, Nothing initially ordered around 700,000 screens for its first run of Phone, but has been able to increase that order after raising more capital and building confidence among distributors with its first product, a pair of wireless earbuds. Since Ear went on sale last August, nothing has been shipped.

Pei said that it helped to prove to the market that the team can manufacture and sell a product at scale. We used this proof point to raise more money for a phone. We can raise more money if the phone does well.

Nothing has raised any equity funding or a revolving line of credit. The company is working with O2 in the UK, O2 in Germany, and O2 in India to distribute the phone when it launches, with hopes of eventually launching the phone in the US.

Nothing has 330 staff and is based in Shenzhen, China, with design and marketing in Europe, India, Taiwan and California. Its intellectual property is located in the UK.

Pei said that a lot of Android manufacturers are taking market share from each other and not doing anything different to try and take share from Apple. The result of this product is that we will be converting more people to use the iPhone.

Some of the ideas of Essential may get a second life with the phone. Nothing bought some of its intellectual property last year.

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