OnePlus is a China headquartered smartphone brand, which is just two years old but has created tremendous buzz in a crowded global marketplace. The reason for the buzz is two-fold: It sells top-of-the-line-specification phones at prices that are mid-range. For this reason, it sells phones only on an invite-only basis, which created a certain cachet. OnePlus says it can afford to do low prices because it sells only online and has razor-thin margins. The invite-only basis was to ensure that it was able to predict demand and not be overwhelmed.
Increasingly, as numerous Chinese brands like Lenovo, Huawei, Xiaomi and others try to carve a niche for themselves in the global smartphone market, OnePlus is trying to differentiate its phones by tweaking the stock Android and offering its own customised OS called Oxygen. It has also announced that it has done away with the invite system. Pete Lau, Founder & CEO of OnePlus, was in India recently and spoke to Venkatesha Babu of Business Today. Edited excerpts:
BT: This December, OnePlus became a two-year-old company and in India you have been operational for one year. Increasingly being in smartphone hardware is seen as a mug's game, given that one player, Apple, seems to take away more than 90 per cent profits of the industry. What kind of differentiator does OnePlus bring? What is the long-term game plan?
Lau: So if you're looking ultra long term, say 10 years down the line, no one really knows for sure. We see our phones right now as a platform. So in the future we want to see OnePlus as a platform and we can provide services through this platform. So we think in terms of mobile internet, digital, there's been a lot of growth. Especially in India you can see that people have skipped PCs over for mobile. So mobile we believe has a great future as a platform especially in countries like India. It's going to change people's lives. Our vision is that we'll become a platform because today it's the mobile phone but tomorrow you don't know what the next gadget is. We'll continue but we wish to be a platform.
If you're looking at five years, we are still going to focus on hardware because right now hardware is still a huge differentiator, it's something that people can touch and feel.
You talked about Apple, which makes 90 per cent of the money in the industry. And why is that? We think that is because the only company that's really ultra focused on products has been Apple thus far and that's where a large part of its success comes from.
Similarly we've always thought that if you make the right product, you make a really great product, people will come no matter what. OnePlus has had the success it has had because the product speaks for itself.
BT: A number of Chinese companies whether it's a Huawei, Xiaomi, Lenovo have excellent credentials. How do you intend to compete with them?
Lau: So we go back to the product, it's the differentiator right. We're going to make one or two products every single year and so the whole year all the focus is on these two products. So it's a lot like Apple in that sense. We're very, very product focused.
From day one we have served the global markets. We've been positioning ourselves as a global company. This is something we tell ourselves both internally and externally. Culturally speaking, from the first day we've had a very global team. One of the challenges has been, how do you serve all these cultures globally and how do you mix all these cultures globally within the organisation so that there is no cultural gap between the company and market.
To us, making a global company doesn't mean how many offices you have globally or how many employees you have globally but rather what's your culture like. How is your culture global? I have visited a lot of Silicon Valley companies and asked why they are considered western and most of it has been because of culture. So one of the main aspects of the culture is that they're very open, they're very transparent. This is something that we stress in our company as well.
BT: One of the attractions of OnePlus has been that it sold through an invite-only kind of a system. Will you do away as you are now fairly large?
Lau: We first started using this invite system because we just did not know how to manage, how many (phones) we were going to sell. It was a way for us to do forecasting, it was a way for us to do inventory management and also sales management. At that time we were not a major company and the invite system whether we use or we don't use it, it's been a point of discussion internally for a long now. So we do have a thought of (completely) not using the invite system.
BT: Now that you have planned to locally manufacture with your partner Foxconn in Andhra Pradesh, is there a real possibility that this invite-only kind of a method would be done away with?
Lau: Invite system is definitely going to be done away with. It's just a matter of when this will happen, that's the question right now. (Note: Subsequent to this interaction, OnePlus has announced that some of its phones are available without invites in India.)
BT: When will the first locally made phones be rolled out? Is there kind of timeline that your partner intends to produce and sell that in the Indian market place?
Lau: We've spent a lot of time ensuring the quality of manufacturing in India is the same as the quality of manufacturing at our current factory and that's the most important thing right now. Right now we are starting our first, our test batch. It's going to be a small batch by the end of December. The first batch will be small but it's because we have to make sure the quality is up to the same standards as the quality that we're producing right now.
BT: Of the few million devices you sell globally, how much do different geographies contribute and what is the role of India?
Lau: We never really talk about the sales figures, and we don't really focus during decision-making internally and externally about the sales figure. Most of the volume still came from European/ North America for the last two years but India is one of our major focus markets. In India the internal goal for 2015 was 1 million units.
The Chinese market is very crowded and we don't see a lot of potential in the Chinese market. Right now the Chinese market does have a significant volume of our sales but in the future we're looking at mainly Europe, North America and India as our main markets.
BT: For the first time ever within your short history why did you release a second phone within such a short time? What made you release OnePlus X within such a short time of the launch of the previous phone?
Lau: OnePlus X is not a flagship. They're two different series of phones. OnePlus One and Oneplus 2 are the flagship phones and OnePlus X is a mid-range phone. These are for two different segments. In future we will release a maximum of two devices per year.
BT: In terms of the physical hardware, every single phone nowadays looks like a big rectangular slab, more or less the internal specs can be traded in. Do you see yourself tweaking your Oxygen OS to be a key differentiator going forward? What role would India operations play given the software expertise that India has?
Lau: So this is something that we're actually planning right now. In terms of hardware to a degree it has been commoditised a lot. You are right in that respect but for us the most important part is in the details and that's the differentiator for us. So we are an online company and online we say, hey look at our phone, the build quality is really nice, it has a great camera but then when you actually get it in your hand and you feel it, that's when you can tell the difference. A lot of media and a lot of reviewers have said that OnePlus X feels very premium for the craftsmanship and for the build quality.
For example, one of the small details would be the edge of the device, what degree should the curve be, we've adjusted that countless times and it's something that we think about for months and months. It's not something that users will see but it's the details that we pay attention to. And of course software is going to be growing more and more important especially with the interaction with the consumers.
The past couple of days, I have been going around asking people to take a look at their devices to see what kind of apps they have installed and to try out a lot of the Indian apps, and to see what the user experience is like in these apps and also what the user habits are and how they differ. And what we've found is a lot of the Indian apps truly do have great user experience and so one of the top priorities actually that we've given here is to hire some software talent.
So we think that there's a lot of really good software product talent in India and we have a lot of Indian colleagues on our software team already that we've hired in the past. Globally we have around 900 employees. In Shenzen (our headquarters) there are people from 19 different countries in our teams.
BT: Will you continue to use single channel - Amazon India - as your exclusive partner?
Lau: Amazon is a very strategic partner to us but in the future we might look at others. So every channel caters to a different audience. In the future there might be a time where we would need to expand our channels. It's something that we're debating because to us if someone else can do something better than you why not let them do it because in the end, user will get the best experience.
For us, we wanted to do what we are good at, which would be product, and we would leave the brand building and the customer support services to specialists.
BT: Since you're locally manufacturing, will there be a change in pricing strategy as far as India is concerned, to make your products even more affordable.
Lau: How we determine prices is by just the totalling of all the costs and when we make a product we don't look at the costs. So for example for OnePlus 3 the cost might go up compared to previous products. Now manufacturing in India saves us a couple of points on taxes. That will definitely be taken into account in terms of pricing as well. After all these costs are added up then we can add a small margin for ourselves on top in order to keep operations running and that's how we set the price. The rest of the savings we can pass on to the consumer.
BT: When do you expect the company to become profitable? Is there a kind of a timeline because at least the last reports I read indicate that you're yet to turn in profit. Is that accurate?
Lau: In the beginning we said two years, at the very onset of the company. Now it looks like we might be able to turn a profit either next year or the year after but the thinking behind this is clear. Profit is not a goal in our company but rather a result. That's how we think about profit right now.
BT: What are you interests beyond running a global smartphone company?
Lau: Earlier, I used to play tennis every single week but that has been tough now. Now when I have free time, I like to really look at design. So if you open up my Pinterest for example, there is a lot of design, there's a lot of architecture, that kind of thing. Design is one of my hobbies. I like simple elegant designs or packaging designs or architecture designs, industrial designs. I have been doing this for about 10 years now.