Essential Shows How Tough the Smartphone Market Is

Even the clout of Andy Rubin doesn’t guarantee success

Essential Products, the company founded by Andy Rubin in 2015, had big plans to shake up the smartphone market. Last week, the company announced that it was shutting down. The news comes despite the impressive background that Mr Rubin brought to the start-up.

Mr Rubin co-founded Android in 2003, the operating system that completely altered the mobile landscape. The platform is now found on 80% of smartphones worldwide and its success has seeped into tablets, TVs and wearables. Google acquired Android in 2005, which then became the foundation of the search giant’s mobile operating system.

In 2017, Essential launched its first and final device, the Essential Phone. From the beginning, the product was mired in controversy, received poor reviews and didn’t sell well. Few operators decided to carry the device, meaning a considerable disadvantage compared with the retail space that major smartphone makers get. This is particularly true in the US market, where securing partnerships with carriers is a must for mainstream success. Other new entrants also found out the hard way that the US market is a hard nut to crack without significant distribution support from major carriers.

Essential planned on releasing other devices including a second flagship phone as well as a smart speaker, but neither ever materialized. The company announced Project Gem in October 2019, a smartphone with an unusual, thin design that looked like nothing else on the market.

Essential Products had raised nearly $330 million from big-name investors including Amazon, Chinese tech giant Tencent and electronics manufacturer Foxconn. At one point, the value of the start-up was estimated to be $1 billion.

The closure of Essential can be attributed to bad timing and broader industry trends, but also to unrealistic expectations. It was highly unlikely that Mr Rubin was going to be able to replicate the success he enjoyed at Google, where he had the might and resources of an Internet giant to build a smartphone software platform. With his new venture, Mr Rubin was just another smartphone maker in an already crowded market.

Essential’s decision to shut down illustrates the challenges facing consumer electronics start-ups, particularly those with hopes of making it big in the highly competitive smartphone business. It’s tempting to think that building a slightly differentiated smartphone would attract the world to your door, but it’s a huge mountain to climb. Comparisons can be drawn to the recent failure of the Red Hydrogen One, another smartphone that came to market to challenge the status quo. It too, lacked the essential ingredients to be a success.