Carl Pei sat down in London to talk exclusively to me about its next product. Pei talked eloquently about the company’s initial challenges, and revealed secrets about what is coming next.
March 17 update below. This post was first published on March 14.
March 15 update. I’ve talked to Carl Pei a little more and, as with the content below, he remains one of the most candid and relaxed executives I’ve ever met. In our further conversation, he had fascinating things to say about something that was key to the success of OnePlus, and which is highly important to Nothing: its community.
When we started Nothing we, of course, took learnings from the past of how we used to do things, but we also learnt from past mistakes, so we wanted it to be a lot more real and a lot more meaningful, and a lot more selective than before. That doesn’t mean that our community is for one specific type of person, but different roles in our community are only for a certain kind of people. If you want to give us advice on design, then you need to be a good designer. We don’t need random advice. If you want to give us advice on sound quality, maybe you need to have some experience in what you’re trying to help us with. So, I think we’re not so much looking at the size of the community but more at the quality. And I think this more measured approach has resulted in a lot higher levels of output from the community.”
But this certainly doesn’t mean the community’s contributions are not valued. Pei goes on: “So, as an example, we see a lot of users posting concepts of what they think our future products will be and some of them are really well made: 3D-animated or really well textured. We didn’t have that before. We have an app called Nothing X to control the earbuds with, but it’s only available for mobile. We have users who made PC and Mac versions themselves, and they’re publishing it for everybody to use. We have this unique font, a dot-matrix style font and one user has made a Cyrillic version of that. Another user is currently making an Arabic version, so that more of our users around the world can enjoy this kind of visual style, So this level of co- creation and contribution of skills is something that I haven’t seen before. Over time, the goal is just to blur the lines completely between our team and our community, so everyone can contribute to building the company and the products.”
“I’m mostly excited about our vision, if we’re able to make it a reality. Day to day we have good days and not so good days but my sight is on the long term.” That vision is already becoming a reality. The vision of Android, for instance, is different. Take the Tesla app. On another phone, you’d need to open the phone, find the Tesla app and open that.
On the Nothing Phone (1), you can put parts of the app into quick settings so it’s much more accessible. “We did the Tesla thing in the early days, when we still didn’t have any engineering resource. We can do a lot more now. Technology enables people to accomplish things in a more efficient or in the faster way or a simpler way. So we definitely need to be innovating on top of Android to accomplish that. Because if you look at the stats, Android is losing market share to iPhone. One of the main gripes that iPhone users have is that they don’t like Android. So how can we improve it and build upon that industry-leading iOS conversion rate?”
March 17 update. In a final conversation with Pei, I got to hear details of the company’s achievements, which are wide-ranging. For instance, the company has a physical store, which opened in Soho, in London in December 2022. The two-storey store sells Nothing, that is, Phone (1), Ear (1) and Ear (Stick)—though Ear (2) is a shoo-in, of course. Those products are accompanied by what Pei calls “curated collections from fashion and design brands”, plus Nothing merchandise.
And, as Pei mentioned, 2023 looks like being a big year for the brand. And the advances the company has made help. Pei says, Whereas in the previous two years we’ve had to balance the availability of supply chain, availability of engineering resource etc. Now we can do more and more things ourselves. The benefits are very simple: the better the product is, the easier the marketing and the sales become. It’s much more cost-effective to focus on a great product than building a huge marketing campaign or doing a huge sales promotion to move units.”
So, the full-scale entry into the U.S. market comes with milestones attached. Not just the one million products sold at the end of 2022 and almost reaching another half million sales since. Those figures break down to 800,000 audio products and big Nothing Phone (1) sales.
“We sold about 650,000 Phone (1) in half a year. I think the first iPhone did about 1.5 million. We’re not there yet, but I think it’s a good start.”
Pei says that the first year’s success was important. “Off the back of the success of the Ear (1) we proved to the market that a small team could design something different and manufacture it at scale. This meant we could persuade better suppliers to work with us. That helped with the smartphone, and creating a smartphone is very crazy. But we did it.” And the team has now grown hugely, numbering more than 400 people in seven offices across the world. “Our software team alone numbers almost 100 people,” Pei says.
Part of the success was anticipation: 200,000 people signed up to the Phone (1) pre-order list. Revenue in 2022 was ten times that of the previous year. Which is a great place to be when the Nothing Ear (2), only the company’s fourth product, is ready to launch.
When Carl Pei launched Nothing, he found it was a tough journey. “We’ve been through a lot in the last few years, but we started the company because we had got quite bored with the industry,” he says. “We wanted to make a change and set a new path for how things could be more fun and more inspiring.”
The first year of production was 2021, when the company made the Ear (1) true wireless earbuds. “When we went to suppliers to say we wanted to make headphones they were very hesitant to work with us,” Pei explains. After all, suppliers said, why would Nothing succeed where other companies had failed?
This made it challenging because the company couldn’t find the best manufacturing partners, or even get the staff they wanted. “We still managed to build a product and Ear (1) did quite well. We built almost 600,000 units, which is more than the original iPod sold.”
Where OnePlus, which Pei created alongside Pete Lau, was a tech company, “Nothing is taking more risks in creative terms, and in product design,” Pei says.
The success of Ear (1) led to more suppliers, and better ones, trusting that they could put together a different, successful product. Nonetheless, the supply chain in 2021—mid-Covid, you’ll remember—had a shortage of semiconductors. And one component, which connects the screen to the motherboard was in remarkably short supply. “We almost stopped developing the phone because we couldn’t get enough of that component. A smartphone has a couple hundred components and one component can choke the entire product. We tried every avenue that had a fraction of a chance and in the end we were able to get them.”
“We saw a lot of iPhone users switch to our brand.” Pei is proud of this because, “we’re seeing on average three to four times more iOS switching to our brands than other brands. We’ve sold about 650,000 Phone (1) in less than a year, which is a good start for our first product in the category.” The company hit the milestone of selling one million products at the end of last year and is already close to 1.5 million.
Unsurprisingly, then, he’s optimistic for the future. “In our first year, if this was a chess board, there were very few moves we could make, now in year three, everything has opened up. There’s a lot more moves we can make. We’re launching the Ear (2) very soon. We have more staff, bigger engineering teams, which allows them to go much more in depth on every part of the product and make sure every part can perform to a high level.”
Given the first headphones were extremely well received, this is setting the bar quite high. Still, Pei feels the company has matured and with Ear (2) and Phone (2) will deliver something more premium.
Improved production techniques mean the company’s gone from double shot injection to triple shot, meaning that it can inject white, black and transparent plastics at the same time.” All very well, but what is the benefit for the user? Actually, there is one. “This upgraded manufacturing means the gaps become smaller with triple shot, it’s allowed us to improve the water-resistance of the earbuds, which now have an IP54 rating,” Pei remarks.
Pei then goes on to reveal, exclusively in this interview, something about the Ear (2). “Sound quality has been really important to us for the Ear (2). We decided to support LHDC 5.0 streaming and also hi-res audio as a result of that. So for any music source that’s hi-res certified we will support it really well.”
LHDC is the Low Latency High-Definition Audio Codec which is designed to allow hi-res audio streaming over Bluetooth. Pei adds, “I told the Spotify team they need to hurry up on their LHDC road map.”
And Nothing is coming to the U.S. “We’re really excited about that. Just from our website we’re already selling our earphones in the U.S. and that already accounts for one third of our sales. Opening up the smartphone to the U.S. will be a really big opportunity for us this year.”
I ask how different things are now he’s not at OnePlus. The benefit of being a small company without the support of a big organization such as OnePlus seems clear. “If you’re an independent then you can control your own destiny, do things that might seem a bit more risky. Big companies don’t take big risks. To do something drastically different might go well but it might not. We have nothing to lose. We should probably do the opposite of what the big companies do.” Pei says.
So, what comes next? “Technology improves the way we live or allows us to be more efficient. With Phone (1) were mostly just different and then later on we improved the software. I think one area that has a lot of potential is the glyph interface. It doesn’t have enough utility to be a real interface yet. Hopefully this year we can take some ideas of how we evolve the glyph interface and see how it can empower people even more.”
The glyphs are the LEDs which are visible through the back of the phone and flash, for instance, to indicate which contact is calling you now.
Aha, does this mean there’ll be glyphs in the Nothing Phone (2)? Pei won’t confirm this, but comments that there is a continuity of design between products, such as similarities between the Ear (1) and the Ear (Stick). My guess is the glyphs will return. And after all, they are one of the most distinctive additions to any phone in years, so I’d hope they’ll return. Pei gives just a little more of a hint when he adds, “If you look at iconic products, they’re iconic because you don’t keep changing the formula.”
The next Phone will have a Qualcomm Snapdragon 8 series chipset, but which chip has yet to be officially confirmed. Again, Pei won’t say, but refers back to the mid-range chip in Phone (1), which was an earlier Qualcomm Snapdragon 7 processor.
“I’ve just seen a long-term review which comments that the Phone (1) feels really fast. You wouldn’t tell it’s a mid-range chipset. And that chip is two and a half years old already. If we can make an older chipset fly like that, I think we can do a lot with a flagship-level chipset.”
Finally, Pei reveals a remarkable detail about the Nothing production line. As he pointed out, Nothing has a problem other companies don’t: its products are transparent. That means that “the insides need to be really beautiful,” as Pei put it. And any dust caught in the manufacturing process is highly visible from the outside. “It’s quite crazy how we built the production line. We built a central air humidifier. It’s like you’re in a rainforest when you’re on the production line. The air is humid, so dust particles stick to the surface instead of floating around the air. There’s even a very thin surface of water on the ground. We’ve done so much work on the dust.”
So, what awaits Nothing in 2023? “I think it’s going to be a step change this year, compared to last year. Because of the resources we have available, we can deliver products that really don’t compromise on anything. We previously had to use off-the-shelf components, for instance, whereas now we can do more and more things ourselves.”
How would Pei define the look of the company’s products? “Looks are about finding your identity and being brave to stick with your identity. So that when users see your product they don’t even need to see your logo to understand who made the product. But I think over time we cannot just be about looks. We have to invest in core technology, to innovate on top of the experience. That’s the only way we can one day, maybe, exceed Apple.”