It’s often said, by people outside Silicon Valley, that people inside Silicon Valley spend all their time solving niche problems that only affect them. When the architect of Android, Andy Rubin, whipped out a new phone at the Code Conference this week, he did little to discourage that belief. His Essential Phone is made out of titanium and ceramic and costs a distinctly premium $699 — its reason for existence, by Rubin’s own account, is that he grew frustrated with the phones made by others and wanted to do better. In a market as saturated as the one for smartphones in the United States, I find Rubin’s new venture indulgent, both for him personally and for the people buying the phone, which certainly has the look and materials of a premium product.
The Essential Phone is no threat to Apple and Samsung’s established duopoly, and Rubin’s team recognizes that, but what’s fascinating about this phone is that, even while remaining niche, it can set the blueprint for making devices in a new way.
What I see when I look at the Essential Phone — as a product rather than as a pretty gadget — is the potential to establish a new manufacturing approach for smart devices. At present, economies of scale dominate the mobile industry — every Chinese company finding success in this market finds it by selling huge volumes at razor-thin margins. Apple and Samsung have carved out reputational beachheads for themselves, allowing them to charge a brand premium, but they too rely on tight vertical integration and supply chain control. Rubin’s Essential has none of that. It’s a comparatively tiny startup with less funding than Apple makes in iPhone sales every month.
But these days being small is no longer a reason to give up (or, in Essential’s case, to not try at all). It seems like almost every week I’m discovering a new small-scale American company that’s finding profitability by producing a low volume of high-margin, premium goods. The classic example from the audio industry is Grado, a Brooklyn-based headphone manufacturer that’s still a family-run business, operating from the same location as it began many decades ago. But more recent examples abound, such as MrSpeakers, a company that got its start with just one man modifying Fostex headphones and selling his mods to an enthusiastic online community.
If you can’t scale up like the big companies, do something unique that doesn’t scale
Then there’s the (rare, but real) phenomenon of Kickstarter turning one or two good products into respectable companies, such as in the case of the Pebble smartwatch, the Oculus Rift, and the Peak Design bags and backpacks. Granted, two out of those three wound up being acquired by larger entities — and that might be the likeliest outcome for Rubin’s Essential company — but the point stands that being small is a more viable strategy with the help of the internet than it used to be.
The lessons I’ve drawn from observing the US headphones industry is that the small companies that thrive do it by having some advantage that isn’t easy to scale up. A clever new way to make a self-repairing zipper with machinery? Forget about it, Chinese vendors will have it on Alibaba before you close your crowdfunding campaign. But what if your unique selling point is leather craftsmanship, or precise audio tuning, or some other skill that takes years to cultivate? Alternatively, you could opt for a sapphire crystal screen, as Vertu has done, or just use other fancy materials that nobody can afford to buy or produce in bulk. As Essential proposes to do.
"This isn’t rocket science, it’s technology evolution."
In his Code Conference interview, Andy Rubin readily admitted to Walt Mossberg that engineering a new phone "isn’t rocket science, it’s technology evolution." He doesn’t expect to have a unique selling point based on sheer engineering genius. But his advantage is that he and his team can dedicate all their energies to perfecting a phone with a titanium frame and ceramic back, knowing very well that they’d sell only a handful of devices. Ceramic has only ever made its way into limited edition phones — like the OnePlus Ceramic X — so its use necessarily puts a cap on manufacturing volume.
Essential can also dedicate more time to investigating more exotic materials and securing less conventional supply sources. MrSpeakers, for example, stumbled upon nitinol while looking for something better than steel or aluminum for its headphone frame. Beyerdynamic, another headphone company, regularly piggybacks on orders from car suppliers: audio companies only ever need tiny amounts of metal to create their products, so they look at what’s being manufactured at scale for other industries and try to adapt it to their purposes. It’s the sort of resourcefulness that’s born out of constraints.
For Apple, Samsung, and even LG, crafting a ceramic phone is a pointless adventure that would cost way too much to pursue, owing to their decision-making hierarchies and processes. But for a small outfit like Rubin’s Essential, it can be a passionate project of refinement that ends up delivering a number of desirable intangibles for the consumer.
The Essential differentiator, if one proves to exist, is likely to be an intangible one
The buyer of an Essential Phone would know, firstly, that it’s an exclusive piece of hardware, owing to its limited production. But that production is limited because it has higher-grade materials, so that’ll be a nice feeling, too. And finally, like every other small-scale operation, whether it be an independent clothes store, bookshop, or coffee house, it just feels more natural to buy from a company that still retains some measure of human scale. Vertu makes a big deal of the fact that you can call its phone support line and speak with the actual person that assembled your phone. Essential would be wise to pursue a similar level of intimacy and approachability with its forthcoming clientele, and Rubin seems conscious of that, too, describing it as "a very pro-consumer brand."
The odds are stacked against Essential. Most smartphone buyers still walk into physical stores, where Essential has no presence, or grab whatever their carrier is serving up as the latest deal, which is another unchecked Essential box. But it’s evident that the product Rubin has created isn’t designed to win in the conventional fashion. The Essential Phone’s unlikely success would be built atop a new mode of operation for a smartphone manufacturer — it won’t be transformative for the entire industry, but it could set an interesting new blueprint for the mostly profitless Android vendors.