The new OnePlus 2 smartphone is being billed as the “2016 flagship killer,” a bold claim for a smartphone that many people have never heard of.
However, when the OnePlus 2 was shown off at a launch event in New York’s Times Square, it drew an impressive crowd. According to The Verge, over 1 million people had already reserved one after the first week.
That’s not quite Apple (AAPL) numbers — the iPhone 6 topped 4 million pre-orders in its first 24 hours — but it’s nothing to sneeze at.
Maybe there’s something to this flagship killer hype after all?
What the Heck Is OnePlus?
OnePlus is a relatively new company based out of China. Formed in December 2013, the fledgling smartphone company had announced its first product — the OnePlus One — in April 2014.
The selling points for the original OnePlus were high-end hardware comparable to leading Android flagships phones, like the Samsung (SSNLF) Galaxy S5 or HTC One M8, and the use of a CyanogenMod customized version of Android instead of the standard Google (GOOG, GOOGL) version.
The OnePlus also sported hardware on the premium side too, and the OnePlus One sold for just $299, unlocked.
Creating Buzz Through Hype
The smartphone market is mature and extremely difficult to break into, especially when you’re talking flagship devices — you need look no further than Amazon (AMZN) and its Fire Phone for a classic example of how even an established technology giant faces a brutal fight to enter into that market.
OnePlus was a startup, it was a Chinese company with no name recognition, it made only one device, it had no carrier support, it lacked a marketing budget and rather than offering a cheap phone specifically for emerging markets, it was selling a flagship device and trying to go global.
OnePlus chose the route of building hype to drive demand for the OnePlus One.
While the OnePlus website sold the smartphones directly to consumers, orders couldn’t be completed without an invitation. And the invitations were relatively tough to come by.
Getting an invite consisted of participating in contests and sponsored events, or receiving one from someone who already owned a OnePlus One. These contests got a little extreme at times, including a silly “Smash the Past” contest where 140,000 participants uploaded video of themselves destroying their existing smartphone for a chance to buy one of 100 OnePlus Ones for just $1.
But the tactics paid off, with sales near 1 million smartphones in 2014, and an impressive 22% of buyers in the U.S. or Canada and 32% in Europe.
Could the OnePlus 2 Actually Be a Flagship Killer?
Selling 1 million smartphones in 2014 is a decent accomplishment, but that’s a drop in the bucket for an industry that saw 1.2 billion smartphones purchased by consumers.
The OnePlus 2 appears to be an even more compelling smartphone than the original. The price is up marginally ($329), but the specs remain impressive, including a 5.5-inch Full HD IPS display, Qualcomm (QCOM) 810 octa-core CPU, 3GB of RAM, a fingerprint scanner, new USB-C charge port, an improved camera, dual SIM (for use in multiple countries), 4K video support and a 3,300 mAh battery.
The OnePlus 2 is built with high end materials, including aluminium, magnesium alloy and stainless steel, and is customizable with premium back cover options such as Kevlar, Rosewood and Bamboo.
With the OnePlus 2, CyanogenMod has been ditched in favor of OxygenOS, a custom skin over Android 5.1 (Lollipop).
In short, the OnePlus 2 makes for a very attractive alternative to competing flagships like the Galaxy S6 and HTC One M9 — both of which cost nearly double the price, if purchased unlocked. And as that Times Square event showed, there’s definitely interest in the OnePlus 2.
When the OnePlus 2 goes on sale to U.S buyers on August 11, it’s still an invite-only affair directly through OnePlus. Without carrier support (and subsidies), sales will be limited. It’s also going to be going up against another aggressively priced Android flagship in the $399 Moto X Pure from Lenovo (LNVGY).
So no, despite the improvements, the OnePlus 2 isn’t going to capture enough of that one billion+ smartphone market to knock anyone else out of contention.
However, while the OnePlus 2 itself may not be a “flagship killer,” it’s part of a growing wave of inexpensive, high-quality smartphones from Chinese manufacturers, such as Lenovo, Huawei and Xiaomi.
Together, these companies are shaking up the global smartphone industry, beginning to make inroads in the American market and resetting consumer expectations about how good (and good looking) an inexpensive Android smartphone can be.
That has already impacted the bottom line of Samsung, HTC and other premium Android smartphone makers who are facing pricing pressures amid softer than expected sales.
It’s perhaps more accurate to say the OnePlus 2, and others like it, aren’t really flagship killers, so much as they are profit margin killers — although in the long run, the two terms may end up being one and the same.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
