Google was forced to enter the smartphone hardware business as makers of Android smartphones have largely failed to develop a product that can compete against the iPhone, an industry expert said, adding that the result of union could rival what Apple has to offer.
“With tighter control on Pixel, Google will now focus on making the experience in that segment equivalent of the benchmark – iPhone and start evolving an ecosystem of services and applications around Android, predicts the expert,” said Faisal Kawoosa, Principal Analyst Telecommunications & ESDM at CyberMedia Research.
“Next few years would be interesting to see this space evolve and decipher whether Google would be able to create Pixel seen as a competitor of iPhone in the Android ecosystem.”
Kawoosa said Google was forced to enter the arena due to a failure by Android smartphone makers in general to come out with products that rival the iPhone in overall experience.
In the last few years, the iPhone has been increasing its presence even in Android dominated markets like India, particularly in the higher-end, he pointed out.
“iOS was just around 15% in 1Q 2012 that has short up to 40% as of 2Q 2017,” he said, quoting numbers for the Indian market — an Android bastion.
On Wednesday, Google announced it was buying the Pixel division of HTC for $1.1 billion. It bought the entire assets that HTC was using for the Pixel phones for Google, though it won’t be acquiring any manufacturing capacity.
“The biggest challenge was that none of the equipment manufacturers barring Samsung was able to bring iPhone equivalent experience for users and this resulted switching to iPhone from other platforms including Android as the users wanted to up the premium ladder,” Kawoosa pointed out.
Even as a lot market share was up for grabs due to the demise of the Blackberry and other OSes, much of the high-end market share freed up has been taken by the iPhone, he pointed out. This, he said, has kept Android within a tight range.
And things are not going to improve any time soon as most high-end Android smartphone makers are not able to grow.
Android’s market share “is expected to further go down as only Samsung has been able to establish itself in this segment using Android. Rest all other brands are squeezing,” he pointed out.
This could have repercussions in emerging areas like virtual reality.
“The failure of Android to establish well in this segment could also hamper its prospects in the emerging technologies that will see adoption in the premium category only,” Kawoosa pointed out.
Whether it is Augmented Reality or Virtual Reality and other such immersive technologies, the use cases are spread across the strata of market, but the early explorers and paying users would like in the higher slabs, the analyst said.
“If Apple through iPhone continues to spread like this in the premium category it would literally make iOS as the default ecosystem for these futuristic applications and that would obviously worry Google.”
Besides, says Kawoosa, in a market like India, the percentage of high-end smartphones has been declining in the last five years as higher-end features have increasingly become more affordable.
The $500 (Rs 33,000) and above contribution to the overall smartphone shipments has gone done from 14% in early 2012 to 3% by mid 2017.
“This is essentially because of the base widening exponentially between $100-$250 that has mass-productised the Smartphones in India,” he said, referring to products such as the Redmi and Lenovo Note series.
Despite this, said Kawoosa, the high-end market continues to grow, and remains a valid target for any smartphone maker.
“In the past 5 years, the premium Smartphone Segment has more than doubled.. This shows that there is growth taking place in the absolute volume terms,” he pointed out.
However, this is not the first time that Google has acquired a smartphone brand. It purchased Motorola for $12.5 billion in 2011 and sold most of it off for $2.9 billion a couple of years later.
It was conjectured that the acquisition was primarily aimed at getting hold of key smartphone patents to protect itself against patent litigation.
This time, Kawoosa feels, the intentions are to develop a benchmark device that is comparable to any in the world.
“That will keep Android ticking in this segment and help Google achieve its objective of delivering futuristic technologies and applications through Android.”
