Google’s Project Ara: Are Modular Phones the Future of Mobile?

Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) Android changed how manufacturers thought about operating systems. Google allowed manufacturers to change, customize, and fork the open source OS to their liking -- adding or throwing out features as needed. That flexibility made Google Android the most popular mobile operating system in the world, with a 78% market share in smartphones and a 62% share in tablets.

Google now wants to apply its Android strategy to hardware with Project Ara -- an infinitely customizable smartphone composed of tile-shaped modules. The base unit, known as the "Gray" phone, will reportedly only cost $50. It's a spartan frame unit that consists of a frame, screen, and a Wi-Fi module -- a camera, speakers, motion sensors, and other frills are not included.

Project Ara: the DIY Lego Smartphone. Source: Wikimedia Commons.

Users can buy additional modules to add the features they want to the back of the phone. For example, a user who likes photography can plug in a nicer camera, while a gamer can plug in a faster processor and motion sensors. A user who needs a phone to last longer between charges could swap out the rear camera for a second battery.

The cost, features, and ultimate price would be entirely decided by the customer. These modules will initially be produced by a new generation of 3D printers from 3D Systems (NYSE: DDD  ) , and customers can fully customize the module designs.

That opens up a world of possibilities for manufacturers, which can produce a wide array of attachments for the device, such as personal health monitors or credit card readers. However, the phone won't be available in the U.S. for some time -- Google plans to launch it in developing markets first to customers who can't afford a smartphone.

Why Project Ara could be a game-changer
Project Ara could be the most revolutionary leap forward since Apple's (NASDAQ: AAPL  ) iPhone, which is ironic since it hearkens back to the earlier days of desktop PCs, when hobbyists assembled their own dream machines from individually purchased components. The key difference, however, is that Project Ara simplifies the process into a matter of plugging in labeled blocks.

This is not the first time Google has simplified difficult concepts into block-like figures. In 2010, Google released App Inventor for Android, which helped developers with limited programming experience to create their own apps through a visual drag-and-drop block editing interface. Simplifying programming into blocks likely contributed to the meteoric growth of the Google Play Store, which now has over a million apps.

App Inventor for Android (now maintained by MIT). Source: Computerworld.com

Google understands that while people love to customize their mobile devices, the idea of putting together hardware and writing code intimidates them.

By turning the back of the Gray Phone into a blank canvas to customize, Google could launch a new market similar to Apple's accessories industry, which rode high on the coattails of Apple's success with protective covers and cases.

Smartphone manufacturers like Sony and HTC -- which release too many versions of the same phone (Xperia and One) with slightly different specifications -- could benefit greatly from releasing base devices like the Gray Phone, then selling proprietary add-on modules individually.

Why Project Ara might fail
Yet as exciting as Project Ara sounds, there's one serious flaw in Google's strategy.

Nokia (NYSE: NOK  ) , which is still the second largest handset maker in the world after Samsung, is a dominant force in developing and emerging markets. Nokia's Asha, a low-end smartphone equipped with a touch screen, camera, speakers, motion sensors, Wi-Fi, and 3G connectivity, only costs $40 to $99. Nokia also released the low-end Nokia X Android phone for $140 in India last month.

Nokia's Asha. Source:Nokia.

When compared to the Asha, Google's $50 price point for the Gray Phone loses its appeal. By pulling apart the components, Google might have inadvertently raised the price of the finished product.

For example, the hobbyist who assembled a desktop computer out of custom parts for $500 won't be happy when he realizes that a comparable Hewlett-Packard PC only costs $250 at Best Buy. The simple reason is that big companies purchase parts in bulk at steep discounts. Moreover, it generally costs less to integrate multiple components -- such as the camera, sensors, and speakers -- onto a single board rather than manufacture them separately.

Therefore, the Gray Phone might not be a great deal for customers in developing and emerging markets, although I still think it could be a very popular and fun choice in developed ones.

The bottom line
Google intends to launch the Gray Phone in January 2015. The smartphone market moves very quickly, so it will be interesting to see if the revolutionary modular phone can make a splash in the maturing, fragmented market. If it succeeds, I wouldn't be surprised to see the idea of modular computing catch on in tablets, laptops, and hybrids as well.

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Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 17, 2014, at 1:05 PM, GaryDMN wrote:

    I thought is was the phone of the past, since they announced they were building it last year in Texas. Google is the king of hype and vaporware.

  • Report this Comment On April 17, 2014, at 4:19 PM, JarJarThomas wrote:

    Googles App Inventor is just ridiculous and useless in real world.

    And it is the same with ARA.

    Just let us think this through.

    What are the biggest problem of Android for developers ? (And you need developers to use your hardware or it is useless).

    -> Users are cheap and do not pay for stuff

    -> Android is fragmented as hell. You need to test with more than 1000 device configurations to capture about 80% of the android market.

    So in the end you have a lot of development effort because of androids stupid fragmentation of screensizes, hardware capabilities and especially the os.

    Now comes google and says "Hey lets make dev life more shittier. Now every user can add or remove hardware features"

    So what does that mean for the developer ?

    You want to use that cool heartrate sensor ? Well ok but how many people are really using it ?

    What only 10% of ARA Users. Hmm don't write it because it makes no money.

    So the user buys hardware which is not used and developers will not use it because to less users buy the hardware.

    In the end we have now another layer of fragmentation.

    And for what ? An extreme ugly phone ?

    To allow some nerds to click their phone together ?

    Yes that makes perfect sense

  • Report this Comment On April 20, 2014, at 2:14 AM, FrankoJames wrote:

    I like the 3D broken up GOOGL phone idea for modular components. Enjoy your billions while you are still alive...

  • Report this Comment On December 18, 2014, at 8:20 PM, LarryZhang wrote:

    "For example, the hobbyist who assembled a desktop computer out of custom parts for $500 won't be happy when he realizes that a comparable Hewlett-Packard PC only costs $250 at Best Buy."

    Are you trolling? Or have you just never built a freaking computer in your life.

    with 500 dollars, you can build a super budget computer equivalent to a pseudo alienware of up to about 1200 dollars worth of manufacture specs.

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