Want to see what a real iPhone killer looks like? Well don't waste your time drooling over reviews of Motorola's (NYSE: MOT ) Droid X or HTC's EVO 4G. Instead, take a look at the Racer, a new Android phone from China's ZTE.
No, the Racer doesn't have a 4.3-inch display like the Droid X or the EVO. Its display is a modest 2.8 inches, and with a much lower resolution. Nor does the Racer have a gigahertz processor like the aforementioned phones; the Qualcomm (Nasdaq: QCOM ) chip that powers it runs at a mere 600 MHz. Its camera clocks in at a mere 3.2 megapixels.
Android at a discount price
So why should a phone with such relatively unimpressive specs make Steve Jobs nervous? Because of its very impressive price tag, and what it implies for Android's future. While the iPhone 4 will set you back at least $599 without a contract, and phones like the Droid X and EVO generally go for more than $500 without one, British carrier 3UK is offering the Racer for a little over $150 as a prepaid phone. If a user is willing to sign up for a contract, the phone is free and plans start for less than $23 per month. I'd say that compares pretty favorably with the $199 and $70 per month or more that consumers in the U.S. typically have to pay for a top-shelf smartphone via contract.
Of course, I doubt anyone who has their heart set on an iPhone 4, and can afford to buy one, will opt instead for a device like the Racer. But as far as both ZTE and Google (Nasdaq: GOOG ) are concerned, I suspect that's quite all right. The goal here is to appeal to hundreds of millions of wireless users worldwide who would love to get their hands on a smartphone running an advanced operating system like Android, but who can't afford the headline-grabbing models.
ZTE is far from alone among Google's partners in pursuing this goal. Android phones such as Huawei Technologies' Pulse Mini and the upcoming Motorola WX445, as well as numerous devices from "grey market" Chinese manufacturers, are also targeting smartphone buyers on a budget. Meanwhile, Apple (Nasdaq: AAPL ) appears content to keep its hardware focused on the high end.
More phone sales = more developers
By reeling in users that the iPhone can't, phones like the Racer will spell serious trouble for Apple's competitive position over the long haul. I'm confident that the iPhone 4 -- antenna issues and all -- will do good business in the coming months, as high-end smartphone buyers continue to snap it up. But I'm just as confident that the lead Android appears to have opened up against the iPhone in terms of phone activations will only expand, as Google's platform penetrates both the high end and the low end. It's only a matter of time before this lead results in Android supplanting the iPhone as the most popular platform for wireless developers.
Thus, no-frills phones like the Racer are a much bigger threat to Apple than they might first appear. And probably also for Nokia (NYSE: NOK ) , which stands to see the drubbing that its high-end smartphones have taken now extend to its cheaper models.
Meanwhile, Android's popularity across different market segments should eventually create hundreds of millions of additional wireless users viewing ads served up either by Android apps or Google's mobile search engine. Which means that Google's mobile advertising business is likely to become a major cash-generator sooner than many on Wall Street expect.