Apple Inc. Faces a New Threat to the iPhone 8 (AAPL)

Apple inc. (NASDAQ:AAPL) is all too familiar with Andy Rubin. The creator of Android led the effort to knock iOS off its perch and take a commanding lead in the smartphone platform wars. With a critical iPhone 8 release scheduled for 2017, Rubin is once again poised to be a thorn in AAPL’s side with news he is preparing to launch his own Essential smartphone.

Apple Inc. Faces a New Threat to the iPhone 8 (AAPL)

Source: Global Playground

If the new AI-powered, flagship smartphone from Rubin’s company lives up to the hype, the Samsung (OTCMKTS:SSNLF) Galaxy S8 and the next Alphabet Inc (NASDAQ:GOOGL) Pixel Phone may be the least of Apple’s worries this year.

Re-Introducing Andy Rubin

A one-time Apple engineer, Andy Rubin quickly became a serious threat to the company’s mobile ambitions. In 2003, he co-founded Android. When Alphabet’s Google bought the mobile operating system in 2005, he became the Google senior vice president responsible for Android.

Rubin continued in the position until 2013, when he took over Google’s robotics division before leaving the company altogether in 2014.

Now, Rubin is back in the spotlight with his own company — Essential — which is focused on artificial intelligence. And it features a flagship smartphone as its product centerpiece.

The Essential Smartphone

Bloomberg was the first to report on Andy Rubin’s new company after CES 2017. According to Bloomberg, Rubin is in discussion with mobile carriers, including Sprint Corp (NYSE:S), about the Essential smartphone.

The device is still in the prototype stage, but sources say Rubin is planning to launch it by the middle of the year, at a $649 price point. That would mean a new flagship smartphone hitting shelves just months before the iPhone 8. It would add to the tough competition of the Galaxy S8, which will be heavily promoted by Samsung, as well as the follow-up version of Google’s Pixel Phone.

The Essential smartphone may pose an even bigger threat to the iPhone 8 than these two Android front-runners.

Bloomberg’s sources describe a smartphone with a larger display than the iPhone 7 Plus, but a smaller form factor because the Essential smartphone has an edge-to-edge display that lacks bezels. A magnetic connector does double-duty for charging and as a port for hardware accessories, including a spherical 360-degree camera. The screen could be pressure-sensitive, like the iPhone’s. And Essential is reportedly working on a ceramic back, which would utilize the same premium material used in AAPL’s latest flagship Apple Watch Edition Series 2.

Behind it all, the Essential smartphone would feature advanced AI technology, which would take on Siri.

Is This a Real Threat to the iPhone 8?

On one hand, it’s easy to dismiss the Essential smartphone. It’s still in the prototype phase, and if its design is finalized, it may ultimately lack some of the features like the ceramic back. There are big unanswered questions, too, including what operating system it will run.

And then there’s the dubious success rate of companies trying to muscle their way into a mature smartphone market. Amazon.com, Inc. (NASDAQ:AMZN) found this out the hard way when its Fire Phone flopped several years ago.

On the other hand, Andy Rubin has a proven track record. He’s very well-connected in the industry and has been successful in raising capital. His Playground Global hardware incubator raised $300 million in 2015. According the Bloomberg report, Rubin is actively in talks with not just Sprint over distribution, but also Hon Hai Precision Industry Co. (OTCMKTS:HNHPF) — better known as Foxconn — as a manufacturing partner for the Essential smartphone.

Rubin also has a team of engineers recruited from Google and Apple working on the phone, with a former Samsung executive heading up marketing.

The Essential smartphone could be a credible threat. Its mid-2017 target release date gives it a shot: Samsung is still recovering from the Galaxy Note 7 PR nightmare, Google’s Pixel Phone has yet to capture significant market share and the iPhone 8 will be months away.

If the Essential smartphone lives up to its billing, with a powerful AI and premium design, and gets a push from carriers like Sprint, it could be a big deal.

That would be a serious problem for AAPL, which is counting on the iPhone 8 launch to re-ignite its stalled iPhone sales.

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

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