Google's next-gen Nexus (current-gen Nexus 6 pictured) is rumored to be manufactured by Huawei. Source: Google
While most analysis in the luxury smartphone markets centers on Samsung's Galaxy line and Apple's iPhone line, there's a big-name competitor in Google's (GOOG 0.56%) (GOOGL 0.69%) Nexus line. Although it hasn't made as big of a splash as the aforementioned models, and as much as Google fans would like, the current-gen Nexus 6 is considered a solid high-end model by most accounts.
However, for Google's follow-up offering, it appears the company is looking to diversify its Nexus line by adding a second model. Early rumors tend to center on the company bringing an "extended" Nexus 5 model to market, a mid-range model with beastly specs and processing at an affordable price. The company is rumored to be pairing with original Nexus 5 handset vendor LG as the OEM.
For the Nexus 6 replacement, however, it seems Google is making a change. The Nexus 6 was manufactured by former Google division Motorola Mobility, which has since been sold to Lenovo. The next manufacturer, Huawei, is already performing well and may expand its strong run by bringing Google's next phablet-sized unit to market.
Great growth for Huawei
For Huawei, the Google deal comes at an opportune time as the company is going from strength to strength. For the fourth-largest smartphone vendor, unit shipments and handset revenues are increasing. As Reuters reports, the company reported first half handset revenues up 69% this year, up 124% in its highly contested home market of China.
However, in perhaps the best sign for Huawei, the company reported it's on target for 33% unit shipment growth to 48.2 million phones. If you're reconciling the handset revenue increase to the unit shipment growth, it is apparent the company is growing revenue by unit shipment growth but also by moving higher-priced phones. The latter fact is important, because the low-end market is almost a loss-leader market.
For Google, however, this is a positive sign. Huawei is clearly aiming at moving toward the luxury markets and it seems like they are succeeding. That success portends good news for Google's next Nexus phone.
Is it time for vendors to abandon the low-end markets?
For Huawei, this isn't happenstance the company is moving more-expensive phones, three years ago the company planned to transition to a higher-cost model. As the aforementioned figures show, the transition is working. The question for a company that is obviously improving on multiple fronts, is should they too abandon the low-end markets.
According to research firm IDC, many appear to be doing just that. In the Chinese market, famous for rock-bottom phone prices, the average selling price per phone has nearly doubled in the last year, going from $128 in the first quarter of 2014 to $222 in this year's corresponding quarter. And while some of that is most certainly reflective of the iPhone's tremendous success in China, as Apple has registered three consecutive quarters of 70%+ year-over-year growth (112% in the recently reported third fiscal quarter), this is indicative of a trade up in the former low-end country.
Is this a big deal for Google? Not from a revenue standpoint as the company is still driven by their search and ad-related businesses, but great phones do bolster its core functions. If anything, a strong Google Nexus would put pressure on fellow Android handset-maker Samsung, that generally owns the luxury Android markets.
