Essential Product raises $300 million in new funding round

The founder of the startup smartphone maker is none other than the co-founder of the Android operating system. Its first $699 smartphone will feature ceramic and titanium casing.

The co-creator of the globally used Android mobile operating system has launched a new startup, Essential Products, which has raised $300 million in new funding round. It has also signed up retailers to sell its first device.

Essential Products’ $699 smartphone encased with a ceramic and titanium case, will fight in the highly competitive market against smartphone makers, including Apple, Huawei and Samsung, this holiday season.

The service providers who have agreed to place the device on their platform include Sprint Corp in the USA, and Telus Corp in Canada, said Essential in a statement. Retailers for the device include Amazon.com and Best Buy.

Essential’s latest funding round was led by Access Technology Ventures which brought its total investment raised to $330 million.

The startup’s strategic investors include Foxconn, Amazon.com, Tencent Holdings Ltd, and Amazon.com, which participated via its Alexa Fund. Investors such as Playground Global and Redpoint Ventures also participated.

Essential’s President, Niccolo De Masi said, the release date for its first smartphone will be announced next week.

This year with many smartphone’s slated to make their debut, the timing and distribution of the new phone are likely to be critical factors. Compared with the enormous distribution network of its competitor, Essential’s smartphone will only be carried by Sprint and Best Buy retail stores in the United States.

Apple is slated to announce its 10th Anniversary iPhone and Samsung is expected to unveil its Galaxy Note 8 in September.

Some of Essential smartphone’s features, such as a detachable 360-degree camera, are also available on Samsung models, which however are bulkier.

“It’s going to be extraordinarily challenging,” said Bob O’Donnell of Technalysis Research. “The initial specs of the phone look good, but not necessarily unique.”

Essential along with Amazon and Best Buy will sell unlocked versions of the phone. However carrier discounts are likely to be a key factor for customer buying decisions, said R. “Ray” Wang of Constellation Research in an interview.

He expects Sprint to charge $300 with a two-year contract.

Sprint did not return a request for comment.

Significantly, Wang noted, that the presence of two strategic investors from Asia potentially signals Essential’s broader goals.

“It’s not just about U.S. distribution. This is going to be a global phone,” said Wang. “The biggest phone markets are China, India and the U.S.”

Essential will focus on “building a brand in the Western World” before it expands its footprint other countries, said De Masi while adding that even if it manages to sell “low single-digit millions”, in its first year of production, it would consider the product as a success.

Essential’s smartphone will use titanium and ceramic while most phonemakers use aluminum or plastic casings.

“Over the next five to 10 years, we will have the same retail footprint and product diversity as Samsung and Apple,” said De Masi.

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