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Will LG or Huawei Make the Next Nexus Phone? Maybe Both

By Jamal Carnette, CFA - May 28, 2015 at 2:01PM

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Rumors suggest Google will release two Nexus phones in the next launch.

Like massive smartphones? Then you better get the 5.96-inch Google Nexus 6 before it's too late. Image source: Google

Although Google's (GOOGL -1.77%) (GOOG -1.79%) mobile operating system is clearly dominant, with Android devices grabbing more than 75% of global market share in units shipped in Q1 2015 (per IDC data), the company's mobile hardware strategy has been less impressive. The high-end Nexus still hasn't developed a wide-scale following. That said, Google's OS power, financial wherewithal, and innovation-driven culture enable it to compete with luxury-driven smartphone competitors Apple (AAPL 0.88%) and Samsung (NASDAQOTH: SSNLF).

In March, the rumor mill heated up about which company would manufacture Google's next Nexus phone. In what appeared to be an transcontinental game of Where's Waldo, reports of Google engineers visiting LG's headquarters in South Korea were juxtaposed with rumors from China that smartphone manufacturer Huawei had won the production contract. Well, if a new report from Android Police is true, it appears both rumors were correct as Google reportedly plans to introduce two Nexus models next year.

For high-end smartphone manufacturers, two is the new one
This suggests continued consolidation within the high-end smartphone market. If true, all three vendors would now offer two smartphone variants per launch.

Apple started the trend by introducing two models with the iPhone 5s and iPhone 5c. Cupertino maintained the two-model strategy during its iPhone 6 launch but focused on screen size as the key point of distinction between the devices.

Samsung followed suit by releasing two models with its newest launch. The current-generation Galaxy S6 and Galaxy S6 Edge went on sale last month. These units are essentially the same size, with the curved display edge on the latter being the differentiating feature. While Samsung does have a larger-screen phablet option --the Note line -- it is generally released and marketed separately. 

Google follows Apple's strategy
Google appears to be taking Apple's cue with its rumored two-unit release by putting two different screen sizes on the market. Old partner LG will reportedly manufacture the smaller 5.2-inch screen. This unit seems to be a follow-up to the Nexus 5 and its nearly 5-inch screen size. The Nexus 5, also made by LG, was considered a high-quality phone for the cost; it appears Google is looking to recreate that value proposition.

The Nexus 6 was a departure from Google's established strategy. The company increased the screen size from 4.95 inches to a massive 5.96 inches. Additionally, Google increased the price, initially, from the Nexus 5's $349 at the entry level to the Nexus 6's starting price of $649. While the phone received positive reviews, many of the criticisms centered on the device's large size and its new, expensive price point.

If the latest rumors are true, Google has seemingly taken those concerns into consideration this time around. The larger unit is rumored to be downscaled from 5.96 inches to 5.7 inches. In addition, the fact Google is apparently going to offer a smaller, presumably cheaper, unit should allay price concerns and allow the company to position this device as a true competitor to Apple's 5.5-inch iPhone 6 Plus.

For this larger unit Google is reportedly working with Huawei rather than Motorola Mobility, which manufactured the Nexus 6 and is now owned by Lenovo. That could signify wide-scale changes in the next-generation phablet.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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