Calling China: How Mobile Startup Jolla Will Sell An Android Alternative

/// Calling China: How Mobile Startup Jolla Will Sell An Android Alternative

January 25, 2013  |  Blog

Finland is no longer the suicide capital of the world–it lost that distinction in 2007. So why would a handful of ex-Nokia engineers decide to get into the murderous smartphone business, taking on Google‘s Android platform, Apple and Samsung? Answer: China.

Later this year their company, Jolla (pronounced YO-la, it means “dinghy” in Finnish), will introduce Sailfish, an open source platform, to the Chinese mobile market. Will anyone notice its claims of being faster and easier to use than Android, Windows Phone 8 or Apple’s iOS–or that it runs Android apps without much modification? Samsung, Mozilla and Canonical are also launching open source platforms to shake Android’s 75% share of the global market.

More dauntingly, Jolla is focused on China, where nine out of ten smartphones run on Google platforms. Jolla cofounder and CEO Marc Dillon claims that many of China’s mobile users are sick of Android. “Standing out is really important in Chinese culture,” he says. Last June he struck a distribution deal with D.Phone, the nation’s largest mobile phone retailer, with 2,000 stores, to sell Jolla’s first model this summer. ST-Ericsson is making the processors for Sailfish phones, and Jolla tapped into its network to find a local handsetmaker.

Jolla now does R&D in Hong Kong, where local and Chinese chipset vendors, handset and component makers, and retailers are part of an alliance. The partners are kicking in $270 million to get Sailfish phones in the hands of Chinese consumers. While Sailfish is open source–cynics might opine that everything in China is open source–Jolla also plans to make money via licensing deals and selling its expertise to install the platform on locally made handsets.

Jolla’s phones will likely target the premium $500-to-$800-per-handset segment for a sliver of China’s predicted 500 million smartphone users by year-end. There were 7.3 million in 2008, says Digital Strategy Consulting. Jolla and its partners aim to sell “a few million devices” in the first 12 months, says its chairman, Antti Saarnio. We estimate Jolla could break even on just 200,000 devices, not including licensing fees to OEMs.

While Apple has struggled to negotiate a coveted partnership with China Mobile, the country’s biggest carrier (with 700 million subscribers), Saarnio says Jolla’s networks give it an edge. Local vendors resent the colossus from Cupertino, which extracts 80% of all profits from the global (read: mostly Asian) supply chain for smartphones, reports Sanford C. Bernstein analyst Mark Newman. And cheaper, local smartphonemakers like ZTE and Huawei are launching powerful phones to challenge Samsung and Nokia.

This year could bring a brutal price war. Apple may launch a cheaper iPhone in emerging markets. Further, what’s to stop Chinese handsetmakers from stealing Sailfish’s open source platform and installing it for free? Several analysts say Jolla could end up on the scrap heap with other failed mobile platforms.

But Jolla has already seen the bottom of the scrap heap. Sailfish is a revamped version of the software platform MeeGo, which Nokia dropped in 2011 before laying off Dillon and his team. He got the band together again and raised $13.5 million from financiers, government loans and severance pay. They’ve spent a fraction of that, Saarnio claims, and plan to raise “significantly” more this year. “We have a straight line, and we’re focused on it,” Dillon says–steering his dinghy right into the squall.

Calling China: How Mobile Startup Jolla Will Sell An Android Alternative


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