‘We Are Good At Making Premium Products’
Carl Pei, a Swedish by citizenship and Chinese by birth, is the co-founder of OnePlus mobile. The Shenzhen- based Chinese smartphone manufacturer was founded in 2013 and is ranked third in Indian high-end handset market. Having released six phones, all manufactured in India, 27-year-old Pei talks to Ashish Sinha on the company’s India plans, why they don’t share company’s financials and why smartphone manufacturers tend to excessively focus more on cameras.
Edited Excerpts:
When did you first decide to enter the Indian market? What was the thought behind it?
In April 2014, we launched OnePlus across 18 countries including China and the US. Immediately we started getting e-mails from India asking for OnePlus phones. With so many e-mails, we planned a trip to Bengaluru where we met over 80 people, 50 of whom were already using OnePlus One. This was October 2014. We could sense an overall excitement for the brand having sold zero phones in India at that point of time.
Indians were buying them through relatives in US and Europe. So, we had to take the India market seriously. We started negotiating with Amazon on entering India and we launched in December 2014.
What’s the company’s relationship with Oppo and Vivo?
We share some of the same industries. Both Pete and me (Pete Lau, CEO, OnePlus, previously hardware engineer with Oppo), we used to work in it. I was there for 10 months, he was there for a long time. There is no influence of strategy, decision-making or anything. We have been running on our own cash flow and we have been profitable for quite some time. The OnePlus One in 2014 was profitable.
Could you share with us the company’s financials?
In 2014, we were really a young team and this is the scary part. I still remember we didn’t really have a sales target but we still had to order components to make phones. So, we said, okay we can sell 30,000 phones; that means we are proving there is a business model.
If we sell 50,000 units, it will be pretty good. And if we manage to stretch our goal to 1 lakh units, that will be a moon-shot. I remember in the first year we reached almost 1 million units for around $350 each. The overall revenue was more than $300 million for the first year. Remember, we launched in the middle of the year so it was really explosive in the beginning and a lot of it went to our heads, we got really overconfident. So in year two, we had a tiny loss, more or less break even, and then, year three we made money again. So, after the first year we stopped talking about the sales and revenue.
Why is that? The financials tell the real health of the company and its achievements.
Yes, they do! But we started noticing that some of the brands, especially startups, they were focused on only funding. All that was being discussed was who raised what amount in C-round then D-round and what was the resulting valuations. What about how the business is doing? Or how popular the brand is? Over time, our focus is much more on making quality products that consumers love. Over time, if you keep the company profitable, year-on-year, you don’t have to raise more money. That is how you build a successful and healthy business. The measure should be product and customer satisfaction.
What is your marketshare in India? Why are you not in lower price points where bulk of the market is?
As per the smartphone range defined by the price points of $400 (over Rs 25,000) or more, we think we have 17 per cent of the market in India. We know that due to premium positioning, we are definitely missing out on the large chunk of the India business. But it is on purpose. Since there are a lot of brands at lower price points, we feel we won’t be able to contribute in a good way if we were forced to make a Rs 15,000 smartphone for India. It wouldn’t be a great product anymore. So, we focus on what are we good at doing, which is making the flagship products.
Why are handset manufacturers obsessed with the phone camera? Why are only camera features central to advertising communications?
On a global level, there is a decline in consumers buying DSLR cameras. Also, the user habits are changing. Earlier, users were happy exchanging text messages. Then came the picture messages. With enhanced phone camera quality and increased data consumption, there are a lot of live stream of Instagram stories or Snapchat stories.
But for how long will this camera obsession last? Aren’t there other notable phone features worth promoting in advertisements?
One company trying to become best in everything is a very hard thing to do. But if you say the camera is more important to me, we are going to over invest R&D into camera, you still have a chance of breakthrough. Some companies are investing in security features, others are doing it in larger battery. Some are staying focused and bringing something new to the market like dash charge. This is the charging on our products. The main benefit of dash charger is that it doesn’t make the phone hot so you can use the phone and charge fast so there are still possibilities to create something better.
Can a handset maker claim that ‘there is no need to buy a DSLR because the camera phones are better’?
The biggest difference between a DSLR and a phone camera is the size of the sensor. Large lens absorb a lot of light that make the pictures much better. This is in DSLR cameras. In smartphones, we don’t have this. Therefore, one needs to think of smarter ways to bridge the gap. For instance, the set up on DSLR allows you to take big portraits, whereas in smartphones, you have the two cameras to measure the distance and then you use software to lower the background. Okay, maybe I cannot catch so much of light (as a DSLR), because I have smaller sensor. But what if I took pictures all at once really fast then the processor on smartphone is much faster than a processor on a DSLR. Then I stitched these pictures immediately that can improve it a little bit more.
Agreed, we cannot go head-to-head with DSLR but you can keep thinking of new ideas that can bring you a step closer, that is what is going to happen in future as well.
The Indian handset market is already very big. How much more can it grow to accommodate premium brands like yours?
Probably the Indian market is not going to grow a lot but the average price of handsets will keep growing. We have seen this happen in China. It will happen in India too. We are patient enough to wait for it to happen. We believe if you make one single commitment to stay here in the market, it will change and expand.
You entered India with an online sales model. Then why deflect that and open a brick-and-mortar store? How many will you add in India?
The experiential part of using a handset is very important and we realised that. So, the goal is not to sell more phones through the experience centre but to create a long-term relationship with the consumers. We want the consumer to be more like friends. When faced with a problem, you can come in and we will help you. It’s just that. But we have discovered that through the experiential centre in Bengaluru, we are also selling a lot of phones. So, it has been a successful experiment.
We are still thinking about the next steps of this experiment. We are testing in Delhi via kiosks. I cannot tell you for sure whether we will open a similar centre here but I also cannot rule it out. We are still undecided, is all I can add.
What is the thought behind introducing a new product? What is the average time difference between two new launches?
Since inception, we have always made one or two products every year. We believe if you focus you can make good products. That has been our strategy from the beginning. Usually there is always one flagship phone that we use, sometimes we would trade our second version, second upgrade too.
How is your brand doing in the Chinese market?
It is doing well. But the thing to understand about the China market is that there are not a lot of focussed brands. We only make premium flagships smartphones. If you want to have premium flagship smartphone, this is the choice. A lot of the people in China are used to many smartphones. But a lot of them have gone out of business because of failure to do sales via online/offline or mixed model. We are probably the only brand in China that focusses on online. Others who went both online and offline way, saw their margins get hurt.
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