Why Google’s hardware business is still not up and running
New York, San Francisco The location was chosen deliberately: in an old factory building in the hippest part of New York’s Brooklyn borough Google presented its new smartphones Pixel 7 and 7 Pro on Thursday, as well as its first wristwatch Pixel Watch. The newest Google Store opened just around the corner this summer, modeled entirely on Apple.
Hardware boss Rick Osterloh presented the new devices with which Google finally wants to catch up with the competition. He promised that they will “turn many everyday problems into a great experience.” The new smartphones could sharpen images, recognize and prevent advertising calls, eliminate background noise and translate over 100 languages.
There were spontaneous applause for two features: the automatic removal of unwanted elements from photos and the conversion of voice messages to text. The iPhone has both functions Apple not available until now, many users have wanted it for years.
“The new devices are the result of many years of development efforts,” said Osterloh. “They are pushing the boundaries when it comes to using artificial intelligence in smartphones.”
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The new devices should bring the breakthrough in the hardware business that Google has been waiting for for years. So far things are not looking good. When the previous smartphone generation was presented, hardware boss Osterloh promised that everything would change now: with its own generation of chips, improved devices and targeted advertising.
An analysis by the market researcher IDC for the Handelsblatt paints a different picture. In the crucial market for Google United States the share of Google devices in the smartphone business has not increased, but decreased. In the first half of the year it was only 1.6 percent. In the previous year it was 2.0 percent, in 2019 it was even 3.1 percent.
Pixel: Google smartphones have been a niche product so far
Ironically, the top-of-the-line smartphone Pixel 6 Pro could not match the numbers of successful old models with a total sales figure of two million devices. And that despite the fact that the smartphone market had recently grown significantly. For comparison: The Pixel 3 from 2018 sold around 2.8 million units in total.
In Germany, the picture looks a little better for Google. According to IDC figures, the group was able to increase its market share there from 1.2 percent in 2021 to 1.7 percent. However, this means that Google smartphones remain a niche product.
IDC analyst Francisco Jeronimo draws a sobering conclusion: “Globally, Google has not significantly improved its sales in recent years. Despite greater R&D experience, more distribution channel relationships and stronger marketing and sales teams.”
What’s more, “After six years in the hardware business, you would expect that every time a new Pixel phone comes out with different variants, the sales numbers will increase,” says Jeronimo. But that is not the case.
Google Pixel 7 and Pixel Watch launch in competitive EU market
Last year, Osterloh announced that he had learned from past mistakes. Google will put more emphasis on marketing and good relationships with sales partners. Mobile phone companies in particular play an important role in sales, as they often combine their contracts with discounted smartphones.
Analyst Jeronimo still sees major problems in this area: “Google continues to face several challenges, above all with the dominance of Apple and the money that Samsung invested in promoting and selling its products.”
Maurice Klähne from market researcher Counterpoint assesses the situation somewhat more positively. “There is certainly room for Google. Network operators are aware of Apple’s dominance and Samsung aware,” says the analyst. Google gives customers more choices when it comes to devices. And that is also in the interest of the network operator.
However, the market for smartphones in Europe and Germany is already heavily occupied. “In addition to Samsung and Apple, there are a number of Chinese manufacturers in the market, including xiaomi, Oppo, Honor, Realme and Vivo,” said Klähne. Google must first be able to assert itself in this competitive market.
Google unveils its first smartwatch, the Pixel Watch
The search engine operator has been providing its operating system for smartwatches from other manufacturers for years. Google is now expanding its product range with its own device in the category for the first time. Product manager Sandeep Waraich explained the essential functions of the Pixel Watch to the Handelsblatt in advance. “We offer the experience of Google in its purest form,” he said.
The smartwatch is not overloaded with advertising or other offers, but focuses on functions that are useful for users: athletes receive data for their training, the watch acts as a navigation device, for example on a bike tour, and at the same time the device is an extended information surface for data from the smartphone.
Despite Fitbit functions: success of Google’s Pixel Watch uncertain
In addition, Google combines the functions of the fitness specialist Fitbit in the Pixel Watch. Google acquired the company in 2021 for around $2.1 billion. “This combination with the power of Fitbit does not yet exist,” said Waraich. With this, Google wants to stand out from the competition in the competitive market.
However, analyst Jeronimo estimates that Google will have a hard time here too: “Apple, Samsung and Garmin together have a market share of 75 percent. Apple alone has 48 percent market share, making it that much harder for any brand to break that dominance.”
Analyst Klähne assumes that Google wants to use the Pixel Watch primarily to showcase the functions of the operating system for smartwatches. However, that does not mean that Google will not play a role in the market with its own devices. Klähne said, “Google certainly has the resources to enter the market and make a difference.”
It is unclear whether this will be possible with the new generation of smartphones and the pixel watch. After all, Google has been building technically leading devices for years, and for a lower price: the Pixel 7 should cost $599 in the USA, the Pixel 7 Pro $899. The iPhones are significantly more expensive – and yet Apple is apparently uncatchable.
Why? One reason could lie in an area that is not directly related to Google’s hardware expertise: for minutes on Thursday, it wasn’t about new functions, but about privacy and data economy. Manager Osterloh emphasizes how “secure and private” the devices are, Google is the “market leader in data protection.” The audience smiles.
More: US tech giants preparing lawsuits against stricter rules in the EU.