Samsung Must Be Sweating Bullets Over This Phone -- and So Should Apple!

Samsung is the undisputed king of global smartphone sales. In certain key markets like America and Japan, Apple (NASDAQ: AAPL  ) rules the roost. These two companies have divided and conquered the exploding smartphone market since Day One, and they earn more than 100% of this sector's total profits. In other words, if you're not Apple or Samsung, you're probably losing money on smartphone sales today.

But this duopoly is not bulletproof. There's one brand-new phone on the market that should have both Cupertino and Gangnam quaking in their boots. And it looks like this:


Image source: Oneplus.

The Oneplus One is a very modern handset. It comes with a high-quality camera, 3 gigabytes of RAM memory, one of the fastest mobile chip sets on the market today, and support for high-speed 4G LTE networking. The phone also features a 5.5-inch full-HD screen protected by Gorilla Glass 3, the latest and greatest 802.11ac Wi-Fi connectivity, and either 16 or 64 gigabytes of internal storage. Oneplus One runs a highly customizable Android version known as Cyanogenmod, previously only found installed as an enthusiast after-market option.

None of these details is enough to scare Samsung or Apple, of course. Other than the unusually large internal memory (most flagship phones today top out at 2 gigabytes) and the unique preinstalled Android platform, this handset simply stands shoulder-to-shoulder with today's best flagships. The Samsung Galaxy S5 and HTC One (M8) can trade punches with this thing all day. Apple's iPhone 5S also holds its own, and the upcoming iPhone 6 should blow these specs out of the water.

So far, so blah.

But have you seen the price tag on this thing? Here's where the Oneplus One really gets interesting.

The 16-gigabyte version will sell for $299 and the 64-gigabyte option stops at $349 per handset. That's the full sticker price, with no carrier subsidies or down-payment installment plans attached. No two-year contracts to sign -- just the undiluted out-of-pocket expense.

On similar terms, the Samsung Galaxy S5 will run you $649 per handset. So does the iPhone 5S. The latest HTC One costs $639 without a contract. All of these prices are for versions with 16 GB of storage capacity. A 64-GB iPhone 5S will cost you $399 with a two-year contract. Without, the price rises to $849.

So the Oneplus One delivers hardware that's comparable to today's finest smartphones at a 55% to 60% discount. And that's why the current market leaders should be worried sick about this new rival.

Too good to be true?
Of course, the Oneplus One isn't perfect. If you're looking for a premium feel, the metal casings of an HTC One or iPhone 5S will suit you better than the hard plastic used here. And Cyanogenmod isn't for everyone -- you'll love it if you enjoy personalizing your handset to the hilt, but hate it if you just want a smooth experience out of the box.

But otherwise, the Oneplus One's biggest failing is more of a business issue. There is no torrent of mass-production supply here, and you currently need a rare invite to get your hands on one.

On the one hand, you have to wonder what will happen to the already threatening price tag once economies of scale start kicking in. On the flip side of the same coin, it's hard to make a real dent in the market with a limited supply on hand.

So Apple and Samsung will probably have a couple of years to chisel out their responses to this low-cost, high-quality rookie. But handset could probably sell out at much higher price points, and I expect it to scale up very quickly.

The future starts now
The smartphone market has growth up a lot since Apple released its original iPhone in 2007. Even if the Oneplus One doesn't end up obliterating the market (and it probably won't, given the lack of large-scale operations and big-ticket financing), its arrival is a sign of maturity that points to fewer feature wars and more pricing skirmishes in the future. And all of this is happening just as the carrier sector stands on the cusp of a revolution, too.

The smartphone sector is ripe for a sea change. The winners in the next generation will have to survive the end of this era first. It will happen whether Samsung, Apple, and the leading networks like it or not. Consumers will get better devices and services at ever cheaper prices, and wireless profit margins will have to absorb the pain of this revolution.

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Comments from our Foolish Readers

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  • Report this Comment On May 06, 2014, at 11:18 AM, GaryDMN wrote:

    Yet another Android phone. There is no barrier of entry into the Android market, so every Android vendor should worry. It won't compete against Apple, but will against Samsung and the slew of other Android phones. They should all be worried about the low cost manufactures, because the lowest cost vendor will win, since there is little differentiation, other than hardware and they will copy the best hardware designs.

  • Report this Comment On May 06, 2014, at 11:32 PM, WakkoWarner wrote:

    Once again, a so called 'journalist' who uses improper terms. There is no such thing as 'RAM memory'. The term is RAM - period. It stands for Random Access Memory. Adding the word memory after RAM is incredibly redundant and completely unnecessary.

  • Report this Comment On May 07, 2014, at 3:08 AM, btc909 wrote:

    Probably for whatever reason even though it supports LTE I doubt it'll work with Verizon.

    Tons of money can be made on non-contract phones but the cost generally ends up being a loser and/or it doesn't work with so & so carriers.

  • Report this Comment On May 07, 2014, at 4:13 AM, DSTDen wrote:

    Saying the iphone 6 specs will blow any current flagship phone from any other company out of the water is just laughable. The last 3 iphones have already been behind by a year or more on the day they have been released. Nice try though and thanks for giving real electronic experts and IT people something to laugh at.

  • Report this Comment On May 07, 2014, at 7:56 AM, rrecine wrote:

    Only smart people will buy this. iSheep do not apply, if it doesn't cost more and have a shiny metal case it does not feel premium to them. That's why Kardashians use iphones. A Mercedes Benz is premium and no phone is.

  • Report this Comment On May 07, 2014, at 11:42 AM, megaforces wrote:

    The only time that I will buy an iphone is if they have the 6" than I switch to their but their phone so damn small.

  • Report this Comment On May 07, 2014, at 3:45 PM, jonfromny wrote:

    Maybe someone can tell me why the G-d Almighty upcoming iPhone 6 will "blow these specs out of the water". I see it has a few more inches on the Galaxy S5. That's about the only thing that's confirmed. What else is so special about it?

  • Report this Comment On May 08, 2014, at 10:36 AM, emiliosic wrote:

    It's not running a Google blessed version of Android; and the article does not mention if it would support Google Play nor content providers like Netflix; etc.

    So this seems more like a hobbyist device; like custom built PCs: Great hardware; if all components play along; otherwise you're on your own.

  • Report this Comment On May 09, 2014, at 9:33 AM, TMFZahrim wrote:

    @emiliosic, the Oneplus team did get a proper Android license. The Oneplus One will ship with the full set of Google apps and services, including the Play store. Netflix support is a given, and not related to Google support at all.

    Anders

  • Report this Comment On May 09, 2014, at 10:03 AM, FoolishLonghorn wrote:

    As more and more carriers offer a plan that offers real savings by not subsidizing the phone, price will become more important--much more important.

    I recently switched over to one of the family plans that cuts my monthly bill by about $80/month. The downside is that I can no longer buy a state-of-the-art phone for a subsidized priced every 2 years.

    If all 4 family members on my plan go out and pay $700 for a phone every 2 years, then 'll only come out slightly ahead. On the other hand, if every family member buys a $300 phone every 2.5 years, my savings will be quite a bit larger.

    Plans that subsidize the cost of the phone have hidden the true cost of the handsets. For many, that is about to change.

    Yes, this phone could present a threat to Samsung and Apple.

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