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Essential Throws in the Towel, Abandons the Smartphone Business

Brad Moon

Launched in the fall of 2017, the Essential Phone was positioned to make a splash in the flagship smartphone market. It featured a premium ceramic and titanium design, a port for add-on modular components, and — before Apple Inc.’s (NASDAQ:AAPL) iPhone X — a near bezel-free display with a notch for the camera. And Essential was led by Andy Rubin, the co-creator of Android. However, the Essential Phone never took off and Bloomberg is now reporting development on a followup to the Essential Phone has been cancelled.

Once again, another promising smartphone from a company that was late to the party has smashed against the iPhone/Samsung Galaxy wall.

Essential Cancels Smartphone Development

Essential Products, Inc. is a startup co-founded by Andy Rubin. He’s the guy who helped to create Android, the mobile operating system that Alphabet Inc (NASDAQ:GOOGL) has used to dominate the smartphone industry. While Android has been good to Google stock, Rubin felt that the Android smartphone experience could be a lot better.

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Rumors started flying about the Essential Phone early last year. It was officially confirmed in May and launched in August. At the time, there was concern the buzz-worthy new flagship might impact the launch of Apple’s iPhone 8 (and iPhone X).

At the time, Samsung and Apple were struggling with perceived quality control issues — including Samsung’s Note 7 battery fiasco. And consumers were grumbling about the rumored stratospheric price being planned for the iPhone X. On the other hand, the Essential Phone promised to be something special. It was made of ceramic and titanium, its display was nearly free of bezels and had a notch for the front camera, and there were going to be modular add-on accessories including a 360-degree camera. Plus, who would know better how to leverage the capabilities of Android than Andy Rubin?

Hon Hai Precision Industry Co., Ltd (OTCMKTS:HNHPF) — better known as iPhone manufacturer Foxconn — was tapped to assemble the new smartphone. Sprint Corp (NYSE:S) backed the launch with a big marketing campaign.

Despite high hopes, the Essential Phone sputtered and within several months its price was dropped from $699 to $499.

According to Bloomberg, the end of the road has been reached. With just 150,000 units sold, the company has reportedly cancelled production of the followup to the Essential Phone.

Wannabe iPhone Killer Becomes the New Fire Phone

The Essential Phone was positioned as a premium flagship device that would shake up the Android smartphone world and even unseat the iPhone as a “must-have” device. But it never really had a chance.

Apple and Samsung have largely sewn up the market for flagship smartphones. Amazon.com, Inc. (NASDAQ:AMZN) found that out in 2014 when it tried to crack the market with its Fire Phone. Chinese manufacturers like Xiaomi have found success by targeting the entry and mid-range market.


In addition, other than the initial 360-degree camera those add-on modules failed to materialize, and the smartphone’s own dual camera system underperformed — a critical flaw when snapping photos is such a big part of the smartphone experience.

Google was also a late-comer to the flagship smartphone party, and it has struggled despite its ownership of Android. Its Pixel Phone lineup sold just 3.9 million units in 2017, fewer than Apple’s average weekly iPhone sales. But that’s still a lot more than 150,000. Meanwhile the Essential Phone is Essential’s only shipping product, and Pixel Phone sales are blip on GOOGL stock. The company can afford to play the long game and slowly build market share. Essential cannot…

What’s Next for Essential?

The Essential Home, a smart home device with an integrated display, has been in development since the Essential Phone was announced. But that project has gone quiet lately and there’s no sign of an imminent release. Bloomberg’s sources say Essential is exploring putting itself up for sale. Andy Rubin has been posting on Twitter, hinting at the possibility of more “game-changing” products to come and suggesting the company had to cancel some “in favor of the ones we think will be bigger hits.” That may simply be damage control.

Whether the company ends up being bought by a bigger company for its tech, or manages to pivot to the smart home, one thing seems certain: The Essential Phone is dead.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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