Market Insight

Lenovo extends its “Modular Mobile” strategy with cheaper Moto Z Play and Hasselblad camera

August 31, 2016


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At IFA 2016, Lenovo unveiled several new products and further promoted its Moto Mods developer programme, notably:

  • Moto Z play - A new cheaper member of the modular Moto Z smartphone series, with a huge battery, and the headphone jack missing from the the previously released Moto Z, but a slower Snapdragon 625 chipset.
  • Hasselblad Moto Mod – A new modular expansion partnered with the legendary camera maker Hasselblad. It features a 10x optical zoom and includes its own sensor.
  • Moto Mods developer platform - An online developer portal based on the $1 million investment plan launched in July, which aims to encourage development of hardware modules by third party developers  
  • Moto Mods developer kit – priced at $125; the kit includes a reference module, a perforated Board and a cover.

 

Our analysis:

Lenovo continues to re-position the Moto brand by re-enforcing the customization options previously limited to Moto Maker, which only offered case colour and material options. But the process is slow: Initial Moto new products have not been innovative enough and the company has been losing market share. Notably, Lenovo is facing increased competition from Chinese OEMs which make premium smartphones but with more affordable prices.

IHS believes the launch of new modular smartphones and collaboration with serious partners, including JBL and Hasselblad, will help Lenovo stand out. But modular smartphones are not enough to make Lenovo an industry leader, at least in the short term.

IHS previously identified “Modular Mobile” as one of the trends from last year’s MWC, and third party support is crucial to the industry players. This trend is accelerating fast in 2016 with LG’s G5 flagship smartphone, and the inclusion of the smart connector on the iPad Pro among other announcements.

Moto Z phones have proved again: driving smartphone replacement cycle is harder than even

It’s increasingly difficult to drive smartphone replacement purchases. Smartphone makers need to convince consumers their existing smartphones are not as good as the latest models. Some OEMs are focusing on lower prices, but this makes it harder to generate profit from a smartphone sale alone.

For smartphone makers, expanding the accessory market with new “Smart accessories” such as Moto Z modules or 360 degree VR cameras is a new channel to drive profits. A sustainable growth of the modular Moto Z phones and modules will generate higher revenues for Lenovo, but significant revenues are not likely unless the Moto Z smartphones sells extremely well to create a large addressable market for modules.

Lenovo positioning its hardware as a platform

Lenovo claims the developer platform is the hardware equivalent of the App Store and Google Play Store. But a better comparison is to Apple’s MFI program where third party accessory makers acquire a license to make accessories compatible with Apple’s lightning connector. Here, Lenovo is looking to take this a step further, by encouraging a home brew modding culture by making the platform and tools available to consumers on a retail basis. While direct sales of such mods may be small, this audience will be influential in driving word of mouth for Moto Z sales.

Modular smartphones and Hasselblad camera module will help Lenovo gain market share given certain conditions:

1. Hasselblad module will lure consumers if it delivers a good camera experience. All top five ranked cameras used on Flickr are smartphones, demonstrating how important smartphone cameras are for consumers. IHS believes, if the Hasselblad Moto Mod camera performance can live up to Hasselblad’s high quality standards, Moto Z smarphones will help Lenovo sell to camera enthusiasts prepared to pay approximately $300. Hasselblad makes high-end cameras for professionals and avid amateurs. However, Huawei recently used the premium Leica brand on its P9, so Lenovo is not unique with this camera brand strategy.

2. Lenovo needs to convince consumers the Moto Z smartphones are competitive among smartphones with similar prices. The first three modules released in July are a $299 projector, a $79.99 speaker and a $79 power pack.  Adding on to the Moto Z price makes the package appear expensive. The cheaper Moto Z Play will reduce this problem.

3. Lenovo needs to sustain a continuous development of the modules and its Moto Z family. The current modules are not compatible with any other existing phones, even with Lenovo’s own non-Z series phones. The company’s products have very diverse form factors, which is why Lenovo has stated it intends to maintain the module standard for future smartphone models, at least for a while. This helps convince consumers modules are a worthwhile investment, and persuade third party module developers there will be a significant addressable market of Moto Z smartphone owners. But Motorola and Lenovo’s modest smartphone shipment volumes threatens to undermine this strategy. Lenovo will also need to boost marketing efforts to make the products known to the mass market after lacking of presence for a long time.

Lenovo has created the first elegant modular smartphone

While it’s not the first modular smartphone, Moto Z is the first to have a mass market design. Different from LG G5, Moto Z modules connect to a smartphone through a magnetic attachment. Users can change the modules in a snap without rebooting the device which makes the connections far more fluid and elegant than LG’s G5.

Moto Z phones also have the thinness and structural integrity which Google’s Project Ara design is lacking. Unlike Google, Moto Z didn’t trade off the space efficiency for modularity. Buyers can have both a very thin smartphone and the flexibility of add-on modules.

While Moto Z phones standalone are not competitive with big-name flagship handsets from Samsung and Apple, with the possibilities the modules offer, they are a considerably more compelling product. They are definitely the best existing modular phones at least for now.

Limited modularity is the future

In theory, a distinctive advantage of modularity is that it enables the consumers to upgrade any component including key parts of a smartphone such as RAM, application processors and screens. This is the approach originally adopted by Google Project Ara. However, Google has shifted away from the full-modularity approach, and the current prototype of Project Ara only allows users to swap the extensions and accessories with the application processor, modem and display fixed. This is much closer to the Moto Z approach, but unlike Moto Z, Ara is not commercially available and is considerably more bulky. The limited-modularity business model of the Moto Z offers significant benefits with few downsides, compared to Ara, and will better appeal to the mass market.

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