Can Google really drive smartphone prices down? How would that change the industry?

November 15, 2013
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Friday Debate aa (1)

In this edition of the Friday Debate, we discuss Google’s smartphone pricing strategy. Many industry watchers think that Google is deliberately trying to drive smartphone prices down, to make them available to more users. With more people able to to enjoy a high-quality mobile experience, Google wins indirectly, by extending the base of users that access its services and feed its moneymaking ad business.

But can Google really drive smartphone prices down? The Moto G and the Nexus 5 are great devices for the money, but how long can Google keep selling at cost? Will the Moto G change anything in the mid-range market? Will Samsung even feel the pinch?

Join us in the discussion, vote in our poll, and sound off in the comments!

Darcy LaCouvee

Great technology at a low price — what’s not to love?

It takes years to build a brand that’s loved and appreciated by consumers, and Motorola still enjoys a very positive one. Phones do not cost $650 to make. The BOM (Build of materials) of even the highest end devices rarely exceeds $300, so what gives?

With Motorola’s brand equity as solid as it is, and with Google backing it to cover its marketing and development costs, it enjoys a uniquely advantageous position relative to current market players. As the Nexus series of devices have shown us – good technology that’s high quality and a joy to use doesn’t necessarily have to come with a ridiculous price tag.

I think it’s a wise approach, and one that could do very well for them. What’s more is that it will put tremendous downward pressure on market incumbents and force them to alter their approach to offer more compelling devices at ever improved prices.

And let’s face it, there’s a lot of factors working behind the scenes to make this a reality. Economies of scale have made 1080p displays, decent quad core SoC’s, RAM, and batteries all a fraction of once they use to cost to manufacture. The specs war never occurred to those that never considered it. Fundamentally, all people care about is a good experience. And now it doesn’t have to cost hundreds upon hundreds of dollars. Shake it up.

Robert Triggs

The Nexus 5 is certainly an attractive product at the top end, and the Moto G seems to be an equally impressive product aimed at the middle of the market. There’s very little competition at the Moto G’s price point, the hardware is great value for money, so this could be the start of a new race to the middle, providing that consumers take to Motorola’s new handset.

With Google’s backing, Motorola is in an excellent position to take on the big players, and perhaps this is the product that could do it. A high profile launch of a mid-range product is quite rare, so no doubt other manufactures will be watching closely to see how consumers and the wider industry react. If the Moto G proves to be a success, I won’t be surprised if we start seeing a greater focus on price and competitive features, rather than just top of the line specs.

But a shift towards more competitive pricing shouldn’t be surprising when we look at the smartphone industry over the past few years. The statistics suggest that we’ve started to see saturation at the top-end of the market, there are now a huge range of products available but with only incremental improvements over the past generation.

Mobile technology is now very competitive at lower price points as well, so it’s only a matter of time before other manufacturers start to pay more attention to their mid-range customers and products. We could certainly see some sustained pressure on prices in the longer term as OEMs try to increase their market share outside of the stagnating premium end of the market, and I’m all for it.

Bogdan Petrovan

I think that the Moto G (and to a smaller extent the Nexus program) may be for Google weapons to keep Samsung in check. The Korean giant made no secret of its ambitions to provide an alternative platform to Android. It invests billions in software R&D right now, and sooner or later, it will want a return from that investment. Perhaps the Moto G is meant to fuel the growth of Android outside of Samsung’s influence.

On first blush, driving prices down would be beneficial for users, but we have to consider that pricing wars can kill industries or at best stop them in their tracks. When no one is making any serious money out of a business, there’s no reason to strive to beat competitors or to innovate. Moreover, getting caught in a downward spiral could prove fatal for some Android makers. Already, profits in the mobile industry are in the hands of just two players, Samsung and Apple. Having Google dynamite the mid-range market with a device that sells for just a little more than its manufacturing costs could be the straw that broke the camel’s back for companies like HTC. Some would say that it’s just natural selection, but I think diversity is one of the strengths that have made Android what it is today, and that the ecosystem would be poorer without the small players.

If Google does indeed plan to shake the industry up (and not just position itself better against Samsung), it could be a huge transformation, for everyone in and outside of the Android ecosystem. It would take huge resources and determination to change an entire industry, but we’re talking about the company that is responsible for Fiber, self-driving cars, Glass, and Project Loon. One thing’s for sure – interesting times lie ahead.

Andrew Grush

$180 for an unlocked smartphone with a quad-core processor and high-quality build? That’s absolutely crazy.

Motorola (and Google) have really outdone themselves with the Moto G, and I truly believe that this is the beginning of change in the mobile industry.

By providing a mid-range handset in a low-cost package, Motorola is sending a clear message that low-cost doesn’t have to mean junk hardware. The big question now is whether Motorola has the global brand power to spread this message.

Having Google’s expertise and marketing dollars will certainly help Motorola’s efforts with the Moto G, but there are still going to be folks that purchase a budget Samsung or LG device simply because they have positive associations with another brand. Of course few revolutions happen overnight.

I believe that the creation of the Nexus line was the first step in a plan to change the industry, and the Moto G is simply the next step. It’s hard to say where Google will go from here, but I suspect the next few years will be very interesting.

As for who’s threatened by Google’s move with the Moto G and the Nexus series? Samsung clearly has the most to lose.

The Korean giant not only rules the high-end Android universe, but it has pretty firm control over the budget market with a nearly countless number of devices spread across various markets across the globe.

You might wonder though, why does Google need to push ahead with devices like the Nexus and Moto G? After all, couldn’t they just sit back and let their Google services expand through the growth of manufacturers like Samsung? They could, but they also risk the power of letting manufacturers have too much control over the Android ecosystem.

Like Bogdan, I agree that the Moto G (and even the Nexus line) is at least partially a way to keep Samsung and other manufacturers in line.

Beyond that, I also feel that Google is trying to improve the reputation of Android in the low-end market. There are likely a ton of folks that go out a buy a Android handset for $100 – $250 outright and automatically assume that such a device properly represents the Android ecosystem and all it has to offer.

Trust me, a single-core 800MHz handset with 512MB of RAM and Android 4.0 (or older) doesn’t give these people a good impression. What then happens is they save up more money, and flee to a rival ecosystem — like Apple.

The Moto G could certainly change the way budget Android users feel going forward, but that’s only if brands like Samsung and LG follow suit by pushing down costs a bit and attempting to deliver more bang for less buck.

What do YOU think?

Join us in the comments and vote in our poll.

[poll id="420"]

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