Market Insight

US operators miss benefiting from Huawei’s Nexus 6P & LG’s Nexus 5X signature Android 6 smartphones

October 07, 2015

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Google has unveiled two new Nexus-brand smartphones:

  • Nexus 6P, made by Chinese brand Huawei, 5.7" WQHD screen, Qualcomm Snapdragon 810, 3GB Ram, 13MP camera, metal chassis, and three storage options: 32GB, 64GB, 128GB.   
  • Nexus 5X, made by LG, 5.2" screen, Snapdragon 808, 2GB Ram, 13MP camera, two storage options: 16GB and 32GB.

Both models will be available for direct purchase from Google’s online store and will be ranged by mobile operators around the world except, notably, in the US.

Our analysis

Google's Nexus smartphones are important because they indicate Google’s priorities in the smartphone market. Nexus models allow Google to specify hardware to support the latest features of its Android OS and Google services, many months before most smartphones will receive upgrades to the latest version.

Nexus devices are the signature smartphones for each generation of Android and provide operators, developers and the mobile industry the first exposure to Google’s latest innovations.

Both these new phones feature fingerprint sensors to help with Google's mobile payment initiatives and improved cameras which work well with the recently released Google Photos. Equally importantly both include a new sensor core which supports Google's wearable strategy and helps to collect contextual information to support the advertising business.

China’s Huawei secures an important Nexus win

This is the first time Google has launched two Nexus smartphone models at the same time. It's also the first time Google has chosen a Chinese brand to make a Nexus device. By working with Google, Huawei and LG can develop a closer relationship with Google, receive a brand boost from the prestige of being considered good enough by Google to deliver the flagship for Android version six Marshmallow. This should deliver a halo benefit for other smartphone models from both companies.

Google's decision to offer two different sized Nexus smartphones reflects a growing understanding that a single smartphone model cannot appeal to all consumers. But Google is a year later than Apple with this realization, and several years behind leading Android smartphone partners such as Samsung, LG, Motorola, and Huawei.

But Google has not fully followed through on the logic behind this marketing position because it is choosing to offer the Nexus 5X only with smaller on-board storage capacities and at lower price points than the Nexus 6P. Unlike Apple there is no price overlap between the smaller and larger screen flagship models. However, if the two models do appeal to different groups, then Google is leaving a segment unserved by not offering a larger capacity version of the smaller Nexus 5X.

The two devices also allow Google to offer a cheaper value-focused Nexus device like as it has done previously with 2012’s Nexus 4 and the Nexus 5 in 2013. Last year, Google positioned the Motorola-made Nexus 6 as exclusively a premium smartphone for a price much higher than the LG Nexus smartphones

Huawei, in particular, will be looking to boost its overall handset business using the prestige of making the higher priced, more premium, model of the two with its unibody metal construction. In the US, other Chinese handset makers have had moderate success in some price segments - notably ZTE and Alcatel OneTouch - but Huawei has struggled. Huawei has the potential to raise its visibility in the US market by making a high profile Nexus smartphone. In the short term, Huawei will receive this US boost through direct-to-consumer channels.

Should Google find a way to re-launch its ecosystem in China, the choice of Chinese OEM Huawei as a Nexus manufacturer will prove useful. In its home market of China, Huawei has both mobile operator relationships as well as its own expertise in selling smartphones direct to consumers online through its Honor brand.

US carriers are missing an important opportunity

US telecom operators are notable among major operator groups in choosing not to range this generation of Nexus smartphones. Even Japan's NTT Docomo, one of the last operators to range the iPhone and extremely controlling of the complete user experience, is offering the LG Nexus 5X.

IHS believes this lack of US operator support is because of misplaced fears, for now, around Google's Project Fi. IHS believes the short to medium term threat from Project Fi is low because the hybrid MVNO offer requires wholesale tariff co-operation from the operators to deliver a consumer service. Instead, US operators should seize the tactical benefit for their customer acquisition volumes from selling these strong Nexus devices through their channels on contract, as operators are doing throughout the rest of the world. 





Global USA
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