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The US smartphone market is devolving into a Samsung and Apple market


If you live in the United States and walk into a Verizon store, you have essentially four options when it comes to choosing a premium smartphone brand: Apple, Samsung, LG, and Google. Yesterday, we learned that continuing to expect LG will be one of these options probably isn’t the best bet.

While there may yet be a premium LG phone that launches on Verizon, the Korean conglomerate looks poised to join Motorola as one of Verizon’s when-it’s-convenient handset partners, and is quite possibly on its way to the Verizon graveyard with the likes of HTC, Sony, and BlackBerry.

The same can generally be said of AT&T, T-Mobile, and Sprint. If LG’s carrier distribution deals for its premium phones dry up, customers on those carriers will have no real option outside Apple and Samsung. Motorola’s Z2 Force is a specialty ruggedized device, HTC’s U11 made it to a single network (the worst one), and Andy Rubin’s startup Essential seems to be having a hard time achieving any meaningful sort of traction over at Sprint.

Recently, Huawei seemed primed to finally enter the US market with its flagship Mate 10 Pro, but the deals it secured with AT&T and Verizon collapsed. While the phone will be for sale in the “open channel” (US phone sales-speak for “not on a carrier”), it’s now basically assured that the number of devices shipped will be trivial. Open channel sales account for a negligible share of high-end smartphones in America, because essentially everyone buying an expensive smartphone in the US does so through a carrier or one of their retail partners on a monthly payment plan.

Take all of this together, and it’s not hard to see that competition among high-end smartphones in the US is evaporating. With each passing year, consumers have fewer and fewer realistic options available to them in this country for a tier-one device, despite the fact that companies like Xiaomi, Huawei, Sony, and HTC continue to produce phones with specifications and performance at least worth holding up to the best Samsung and Apple have to offer. But between a frequent lack of CDMA network compatibility – along with the far larger problem of a lack of carrier distribution – none of these phones are going to be considered by an average smartphone buyer in America. People like us are well aware of them, but smartphone enthusiasts don’t account for a meaningful portion of the phone-buying public in the US.

The numbers support this: Samsung and Apple account for 70% of all smartphone sales in the United States according to some recent figures. That means lumping them together with all of those free burner smartphones prepaid carriers ship by the ton, and then with the phones you and I might actually recognize like the G6, V30, U11, Pixel, and Moto Z. But these are shipping in numbers such that relative to the two juggernauts, they’re barely a factor.

What’s to be done? Clearly, relying on Android’s partners to generate meaningful competition has not succeeded in the US market, where the carrier distribution model reigns supreme. And with premium products from LG and Motorola – once considered worth mentioning in the same breath as Samsung in the US market – foundering, it seems longtime participants in the carrier market are having trouble even holding their ground.

Google appears to realize this, but its Pixel program remains, relatively speaking, a thorn in the side of the dominant players in the market, and on a single carrier at that. But with Google’s narrative around Android’s strength having long been the competitive ecosystem argument, it’s telling that Google itself is now admitting that model doesn’t function in its home country.

While the Pixels are great smartphones, Google is relying on the most traditional approaches it can to push them. The advertising campaign behind the phones has been massive, and Verizon’s frequent and aggressive discounting of them is certainly helping to move units. Being limited to a single carrier distribution partner isn’t the worst thing – after all, Verizon is assisting Google in heavily advertising the phones – but it will certainly slow the rate of saturation. Meanwhile, Apple and Samsung are distributed on every major carrier.

Whether Google’s bet here will pay off remains to be seen. Google doesn’t disclose how much it’s spent advertising and developing the Pixels, nor how many it’s sold, let alone offer any kind of profitability assessment for its smartphone division. It’s quite possible Google is burning a lot of money in its attempt to gain a strong foothold on Verizon, though you have to assume the ultimate goal is to move on to the other three major carriers.

If one thing is clear, it’s that Google has the money to burn. There’s also substantial risk in continuing to let Samsung steamroll any and all competition that enters the market. With enough leverage, Samsung could eventually attempt to wrest control of Android in ways that would be detrimental to Google’s bottom line by threatening to abandon the platform or go the Amazon route and fork it. After all, if Google actually had to bid to be the default search provider or to have its app suite installed on the Galaxy S8, Android could rather suddenly become a very costly venture. (Currently, Google contractually obligates manufacturers to make Google the default search, voice, and assistant provider.)

This all leads me to suspect Pixel is a far bigger bet for Google than most people realize. Android as we know it could figuratively hang in the balance. I don’t mean to sound dramatic, but when consumers are faced with fewer and fewer choices, generally those choices get worse, because the companies offering them can abuse that control. Google is far from perfect, and I’m not attempting to paint a faceless corporation motivated by a clear profit interest as some kind of hero. But as Android’s biggest partners fail time and again to meaningfully challenge the powers that be in the US market, Google faces a choice: let things play out naturally, or attempt to assert its own vision for the larger smartphone ecosystem. I think Apple and Samsung’s ever-increasing dominance have forced the latter option.



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