Can an Asus Smartphone Shake Up the Status Quo?

by Brad Moon | July 31, 2013 3:07 pm

Can an Asus Smartphone Shake Up the Status Quo?

Asustek Computer — or Asus, as it’s better known — has built a reputation for designing quirky computer hardware and mobile devices that would put even Samsung (SSNLF[1]) to shame.

Initially, its smartphone offerings were traditional devices running Google’s (GOOG[2]) Android operating system — you’d have trouble visually differentiating them from any other smartphone of the time. Not content with conformity, Asus has pushed the boundaries in recent years by turning instead to monster 7-inch smartphones (the $300 Fonepad) and models that dock with a display to transform into a tablet (the $1,300 PadFone[3]). If you thought Samsung’s Galaxy Note “phablet” was unusual, it seems downright conservative compared to the mobile gear Asus sells.

But if you want to buy one of those Asus smartphones today, your best option would be eBay (EBAY[4]) since Asus has no U.S. wireless presence.

However, the company is now eying American shores. In an interview with AllThingsD, Asus Chairman Jonney Shih confirmed his company has been hard at work establishing relationships with U.S. wireless carriers and that a 2014 entry is a likely scenario[5]. If Asus launches a smartphone for the U.S. market, does it stand any chance of shaking up the status quo?

Worldwide, the smartphone market is dominated by Samsung and Apple (AAPL[6]). Combined, they ship more than 40% of smartphones[7], with LG – the third place vendor — barely cracking 5%. In the U.S., the two big players have an even tighter lock on things with Apple selling 39.2% of all smartphones in May[8], while Samsung accounted for 23%. A recent study highlighted in The Verge shows just how dominant Samsung has become in the Android smartphone space: with more than 100 different models in circulation, the South Korean manufacturer accounts for 47.5% of all Android smartphones in use[9].

If LG, Sony (SNE[10]), HTC and Google’s own Motorola can’t break Samsung’s stranglehold on Android smartphones — or even combine to knock Apple off its perch in the U.S. — what hope does Asus have of doing so? (Especially considering it will be not only starting from scratch, but coming into a slowing market that’s also being targeted by Chinese manufacturers[11] like ZTE and Huawei.)

I don’t see Asus being much of a threat to Apple. If someone is looking to buy the latest iPhone, they’re generally not even considering Android, Windows or BlackBerry (BBRY[12]) smartphones, so Asus poses no threat there. However, the right device could appeal to consumers who are after something visually different.

But while it’s unlikely to affect Apple, Asus could end up stealing a chunk of Samsung’s business.

Yes, most smartphone makers are scrambling to bring lower-cost models to market amid softening demand for expensive flagship models. But people still are shelling out $700 for Samsung’s Galaxy Note 2 phablet — to the tune of selling 5 million of the niche device within two months of launch[13]. And niche smartphones are what Asus does best. If it came at the U.S. market with variations on its Fonepad and PadFone, you can bet it would eat into Samsung’s market for big smartphones, not to mention it would threaten Samsung’s Android tablet sales.

While $1,300 seems expensive for the Asus Padfone, buyers get a premium smartphone with a 5-inch IPS display, brushed aluminum case, LTE, a 13 MP camera and beefy processor … as well as a 10-inch HD tablet the phone docks into and powers. Between its two components, the Padfone has about 50 hours of talk time before needing to find a power outlet, and it offers the advantage of using a single data plan for two mobile devices — the whole bundle is only half an ounce heavier than the latest iPad with Retina display.

And Asus might be a non-entity in terms of smartphones in the states, but its Padfone and FonePad lines are well known outside of the U.S. In fact, the Padfone is popular enough to have reached its third generation. In addition, Asus is established in the U.S. as the manufacturer of one of the most successful Android tablets — Google’s Nexus 7 — as well as its own line of innovative Android and Windows 8 tablets.

And then there’s that well-deserved reputation for pushing the envelope, releasing high “wow factor” devices like the Transformer AiO PC (combining a tablet and desktop PC) which was a Consumer Electronics Show star[14], the 18.4-inch Portable AiO Android tablet[15] and the Transformer Book[16] Windows 8 tablet/laptop combo.

If Asus delivers a 5-inch block of black plastic or aluminum and glass to U.S. carriers in 2014, it’s going to be lost in a sea of similar smartphones from equally “exotic” manufacturers like ZTE, HTC and Huawei.

But if the company brings its proven line of Padfones and FonePads to the party, there’s a good chance it could out-niche Samsung. It might even pick up some iPhone converts who want something really different and add some competition to the U.S. smartphone market.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  2. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  3. the $1,300 PadFone: http://www.asus.com/Tablets_Mobile/PadFone_Infinity/
  4. EBAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=EBAY
  5. 2014 entry is a likely scenario: http://allthingsd.com/20130729/taiwans-asus-aims-to-enter-u-s-smartphone-market-next-year/
  6. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  7. Combined, they ship more than 40% of smartphones: http://www.idc.com/getdoc.jsp?containerId=prUS24239313
  8. Apple selling 39.2% of all smartphones in May: http://www.comscore.com/Insights/Press_Releases/2013/6/comScore_Reports_May_2013_U.S._Smartphone_Subscriber_Market_Share
  9. accounts for 47.5% of all Android smartphones in use: http://www.theverge.com/2013/7/30/4570582/android-fragmentation-graphics-july-2013
  10. SNE: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNE
  11. targeted by Chinese manufacturers: http://investorplace.com/2013/06/huawei-ascend-p6-worlds-thinnest-smartphone/
  12. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  13. selling 5 million of the niche device within two months of launch: http://news.cnet.com/8301-1035_3-57553995-94/samsung-5m-galaxy-note-2-units-sold-in-2-months/
  14. which was a Consumer Electronics Show star: http://investorplace.com/2013/01/ces-craze-tablets-tablets-and-more-tablets/
  15. Portable AiO Android tablet: https://www.asus.com/News/G8x01idYGf5Ix3qM
  16. Transformer Book: http://www.asus.com/vivo/en/transformerBook.htm

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