Google's (NASDAQ:GOOG) (NASDAQ:GOOGL) new Nexus devices could arrive soon, according to recent reports at TalkAndroid and Android Pit. The two devices -- the LG-produced Nexus 5 and the Nexus 6 phablet from Huawei -- will reportedly be unveiled on Sep. 29, with preorders starting two weeks later.
The new Nexus 5 will be LG's third Nexus device after the Nexus 4 from 2012 and Nexus 5 from last year. The new Nexus 6 will be Huawei's first Google-branded device -- Motorola Mobility's handset unit, which Lenovo acquired last year, produced the previous model. Let's take a closer look at the Nexus brand, why Google rotates it among manufacturers, and whether or not this strategy helps it sell more devices.
Understanding Google's Nexus strategy
Google's Nexus phones and tablets, which run stock Android with a few enhancements on high-end hardware, are considered the company's top-tier flagship devices. Google designs, develops, markets, and supports the devices, but select OEMs do the heavy lifting by manufacturing and selling them.
Google's other Nexus partners have included HTC, Samsung (NASDAQOTH:SSNLF), and Asus. Nexus devices are often the first to receive Android OS updates, and are generally cheaper than branded Android devices with similar specifications. Google rotates the Nexus brand among manufacturers for two main reasons. First, it eliminates the risks of relying on a single OEM partner. Second, it showcases the most recent version of Android in its "purest" form, before it gets modified by custom UIs from various manufacturers.
There's been speculation that Google rotates the Nexus brand to keep larger Android OEMs in check, but Google VP of Android Engineering Hiroshi Lockheimer told Business Insider that wasn't the case last November. He noted that sales of Samsung and HTC handsets helped Google just as much as Nexus sales, and that the company wasn't "trying to take share away" from other OEMs. Instead, Lockheimer stated that all Nexus devices were developed as test units to ensure than Android would work properly before being sold to mainstream consumers.
How Nexus complements Android One
Google's Nexus strategy also complements Android One, its initiative for launching low-end devices in emerging markets. Like Nexus devices, Android One devices run on stock Android, receive OS updates before other devices, and are manufactured by OEM partners. The primary goal of Android One was to reduce OS fragmentation among low-end devices so they would be compatible with the operating system's newer features.
Unfortunately, that initiative hasn't gained much ground, because many OEMs disliked using stock Android instead of their own customized versions. Since low-end Android devices are already sold at paper-thin margins, many OEMs relied on their own custom ecosystem services, like app stores, to squeeze out additional revenues. Simply put, Android One devices helped Google monetize Android while cutting OEMs out of the loop.
Nexus devices are at the other end of the price spectrum, but they face a similar challenge. For example, if Samsung is offered a choice between manufacturing its own handset preloaded with its own services or making a stock Android one for Google, it will obviously prefer the latter. That's probably why Samsung stopped making Nexus phones after sales of its own Galaxy S devices took off.
How this helps LG and Huawei
That brings us back to LG and Huawei, two companies that can still benefit from selling Nexus branded devices. LG reported that its global smartphone shipments declined annually in the second quarter despite the launch of its newest flagship device, the G4. Since reports indicate that the G5 won't arrive until early next year, it makes sense for LG to launch a new flagship device -- albeit under the Nexus banner -- for the holiday season.
Meanwhile, Huawei's global smartphone sales surged 39% annually in the first half of 2015. But despite being the third largest smartphone maker in the world, it still has a limited market presence in the U.S. In 2012, a government report claiming that Huawei and its Chinese peer ZTE posed "national security risks" also dented its reputation and throttled sales. But with the Nexus brand, Huawei may have found a backdoor into the U.S. market with a Google-branded flagship device. Since the Nexus 6 will be co-branded with the Huawei logo, it could help build its brand in the U.S. market.
Let's not overstate the impact
The most successful Nexus device was LG's Nexus 4, which sold just 375,000 units worldwide between Nov. 2012 and Jan. 2013. By comparison, Samsung sold six million S6 flagship devices within the first three weeks. Therefore, LG and Huawei's sales might experience a slight boost from launching a Nexus device, but they'll hardly be game-changing devices.
For Google, the Nexus series will remain an interesting showcase for Android in its "idealized" form, but, like its Android One counterparts, it prioritizes Google's needs over OEM ones. As a result, OEMs will continually outgrow the Nexus brand as sales of their own handsets improve and their first-party ecosystems expand.
Leo Sun has no position in any stocks mentioned. The Motley Fool owns and recommends 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.