Google's Piecing Together a Smartphone Revolution

Just last month, Google (NASDAQ: GOOGL  ) sold Motorola to Lenovo for $2.9 billion, a move that seemingly took it out of the mobile handset space. But absent from that deal was Google's Project Ara, one of the company's moonshot ambitions, whose goal is to bring cheap smartphones to emerging markets -- one piece at a time.


Source: Motorola. 

Changing the rules of the game
The latest numbers from the International Data Corporation show that worldwide smartphone growth is slowing. Between 2012 and 2013, smartphone growth hit 39.2%, but in 2017 it's expected to be just 8.3% and fall to 6.2% in 2018.

Phone makers are scrambling to tap into emerging markets, where cost is one of the biggest factors keeping people from purchasing their first device. Google could have kept Motorola and created low-cost devices for these markets, but instead it's decided to try to change the way people think of smartphones.

The idea behind Ara is to let people piece together their own smartphones by purchasing optional component upgrades. According to a recent Time article, Google expects the entry price for an Ara phone to be $50, which would have optional upgradable tiles that will clip into the back of the phone to improve features like data storage, battery life, the camera, and wireless connectivity.

The $50 base version, running Android obviously, wouldn't even have a data connection but would have Wi-Fi, and consumers could purchase extra components as they have the money. Nearly everything would be changeable about the device, including the screen and the processor.

Price matters
Aside from interchangeable components, the low price also sets the Ara devices apart from the current market. For comparison's sake, Nokia just introduced the Android-powered X smartphone, that's aimed at emerging markets and sells for about $120.

While the Nokia X is a much more capable phone than the introductory Ara will be, it's still more than twice the price. For people who are looking for smartphones but don't have a lot of money to spend, they could buy an Ara phone and then upgrade the components with new modules as they're able.

Foolish thoughts
We're still a year away from seeing Project Ara bring its first phone to market, but Google is showing it's serious about the devices by scheduling a two-day Project Ara developer conference in April.

The smartphone space has always been competitive, and as the market's growth continues to slow, Google's unconventional path could give it an advantage in emerging markets. The company will need large acceptance of the modular approach, outside of enthusiasts looking to build their own phone, in order for Ara to be a success, though. That means the company will need to convince component makers to sell specially designed units for Ara devices.

If anyone knows how to get the world's tech companies to go tromping into unknown territory, it's Google. The company proved it could single-handedly change the software mobile landscape when it launched the Android OS years ago. Now, investors have to decide if Google can do the same thing with hardware.

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