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How Smartphone Upstart Essential Plans to Challenge Apple, Samsung, and Google

Aug 18, 2017

Apple and Samsung are too busy chasing profits to create cutting-edge phones that capture the imagination of the masses.

At least, that’s the perspective of Andy Rubin, the CEO of the consumer electronics startup Essential that is expected to start shipping its debut device, the Essential PH-1, today. The startup, which is backed by big tech companies like Amazon and Tencent, pitches itself as an underdog against the makers of the blockbuster iPhone and Galaxy.

Indeed, Essential is an underdog in several ways, like its small workforce of 100 employees versus the tens of thousands who work at the much bigger companies. Having only existed for only a few years while developing its first device, the company also faces the challenge of selling a $700 smartphone while having little-to-no brand-name recognition.

These obstacles don’t seem to faze Rubin, the creator of Android, the mobile operating system that powers nearly every major smartphone that’s not made by Apple. In 2005, he sold the company behind Android to Google and then worked at the search giant until 2014, when he left to form the hardware startup incubator Playground. Playground, which manages a $300 million investment fund, is also backing Essential.

At a media event this week at Essential’s headquarters in Silicon Valley, Rubin was optimistic about the startup’s chances of making an impact in the smartphone market, which he concedes is a “100% saturated.” He believes this over-saturated market has led to big phone makers stifling technical innovation in their products while focusing their energies on convincing customers to constantly upgrade their phones despite only relatively minor updates.

Rubin's strategy is to sell a phone that can be steadily upgraded without customers having to buy a new device. Instead, they'll be able to upgrade its over time by adding accessories, saving money in the process.

The startup’s first accessory is a camera attachment that can film 360-degree video. The camera, which costs $200 but sells for $50 when bought with the smartphone, attaches using a magnetic connector, which Rubin bragged would make it easy to attach to future versions of the Essential smartphone. As of now, the 360-degree camera only works with Essential smartphones, and the company has not revealed what other accessories it’s developing.

The Essential phone comes without any logos on its body, a nod to Rubin's belief that once someone buys a product, “it should be yours.” People shouldn’t have to be "reminded who built” their phone every time they look at it, he says.

The phone, Rubin argued, comes without pre-installed apps that people don’t want, a phenomenon known as bloatware. However, because Essential's phone is based on Android, it comes with nearly 20 Google apps like Gmail, YouTube, and Google’s voice-activated digital assistant. If people decide to lease the phone at a discount from Sprint, which is the only U.S.-based carrier network that is selling the phone, their phone will come with Tidal, the music streaming app owned by musician Jay-Z and others.

It should be noted that Google also debuted it’s own high-end Android-based Pixel phone in the fall that costs $650.

Essential doesn't plan to only compete with the big phone makers. Rubin also says that artificial intelligence technologies are crucial to Essential’s plans to develop a range of consumer hardware products that can ingest, adapt, and respond to a person’s behaviors and habits.

Major tech companies like Apple (aapl), Google (goog), and Amazon (amzn) are investing hundreds of millions of dollars in AI technologies to improve their existing products like search and to tailor them to individual users.

Like Apple’s Siri, Google’s Assistant, and Amazon’s Alexa, Essential is also developing its own voice-activated digital assistant, which won't be ready for the phone's debut. The digital assistant will also help power Essential’s planned voice-controlled home speaker, a rival to Amazon's Echo, Google Home, and Apple’s HomePod.

In many ways, it seems Essential is following in the footsteps of the companies that it wants to disrupt. But the startup’s executive team is optimistic and believes it can be successful over the next five-to-ten years.

“We have a cost structure that enables us to be profitable on small unit numbers,” Essential’s president Niccolo De Masi said.

While big companies only focus on “becoming the most biggest, profitable firms in the world or of all time,” they will lose focus on building high-quality products, De Masi predicted. If so, that may leave room for Essential to flourish, that is if it first doesn't fall victim to an extremely risky strategy of taking on huge incumbents with nearly unlimited resources.

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