“I want to ban the word AI in the company”, said Carl Pei while interacting with a few members of the Indian tech media on the sidelines of the CMF Phone 2 Pro launch event in Delhi. While on the face of it, the statement does feel a bit shocking, especially coming from Carl, he has his reasons. Carl Pei, who helped kickstart OnePlus back in the day and is now the CEO of Nothing, enjoys massive popularity and following among fans and the community, and not without good reason. He’s a man on a mission, and he’s very clear on the direction he wants to take Nothing and its sub-brand CMF. Excerpts from the conversation:
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On India as a smartphone market:
India, I think, may be the hardest market because the consumers here demand so much. They’ll nitpick every little detail in the product, and they want it for the best value. So the reason why this is super challenging for us as a startup is that we don’t have the same scale as some of the bigger companies. If Samsung ships 200 million phones a year, and the Chinese brands ship like 100-150 million a year, we’re still in this low single-digit millions. So when we go and negotiate the pricing for the products, there’s still a big cost gap. At the same time, we have to satisfy the needs of the Indian consumers, who are quite price-sensitive. So it’s very challenging as a startup company.
On venturing into higher price segments of the smartphone market:
The main focus is to drive the volume up. So we can’t increase the prices. If we want to drive the volume up, we have to pick what we want. We want volume. Therefore, we have to be competitive. Because the consumers here have so many different choices. When a consumer in India has to buy a phone, they consider nine options, nine different brands. In UK, they consider two and a half brands. So the level of competition is very different here. So first, we have to grow the volumes, and I don’t see the price value equation changing. We only have a certain amount of cost that we can invest in each product in the building materials. So we have to be extremely thoughtful about what we prioritise and what we deprioritise, So for the new CMF phone, we have prioritised the display. This is probably the best display in the segment, with very good outdoor visibility. So hopefully, in the testing, the media can compare different phones in this price segment and outdoor visibility. And the second part is the camera. Camera is like one of the top features that consumers demand from a smartphone, and I think we should have one of the best, if not the best, camera in the segment, both on the hardware side and on the software side. I know that in 2022, 2023, and a little bit last year, the camera has been one of our weaker areas. But this year, we’ve really invested in the team. It’s gotten a lot better. And I think you can already see that from the 3a series launch, the camera reviews got a lot better. Also, if you look at the Flipkart score, I think camera ratings went from 4.1 to 4.4-4.5 in just one year. So I’m pretty confident now, with this upgraded team, that consumers will find a lot of value in the new cameras.
On the pressure to innovate and offer something new with each launch:
I think our best ideas are for later. We’ve been super practical about the way we run this business. Because, as you can imagine, it costs a lot of money in engineering to develop each new product. So every product we launch has to be a hit, right? To offset all the costs that we invest in. Therefore, we are quite conservative in the innovation that we bring to the market over time. As the volumes grow, as the margins grow, that’s when we can dare to be more innovative in our product approach. On the smartphone side, we’re going to see that happening on the software to begin with. AI is a big buzzword. I almost want to ban AI as a word in the company, because most brands, I think, use it incorrectly. I think AI is just a tool, just the ingredient to try and solve a user need. AI is not the end in itself, but I think most brands are just marketing this. AI this, AI that, AI everything. That’s not our approach. So on the software side, expect to see a lot more. On AI, Essential Space was our first foray into this area. Very functional. Second brain. We’re overwhelmed with information, and this helps you organise it. That’s just for now — we have a very long and robust roadmap for Essential Space. So it’s going to be iterated very quickly. There’s going to be more and more features. Internally, we’re also decoupling the hardware from the software. The way a smartphone company works is on a project basis. So if there’s a new phone in the pipleline, all the teams have to deliver something for it. That’s what happened before. So whenever we had a new phone launch, Nothing OS was also upgraded with a couple of extra features to support that phone launch. But I think software deserves a lot more dedication. So now we have split the teams, so software is a separate product, and Essential Space is one product that has its own roadmap, its own schedule. It doesn’t have to wait for the hardware side, because the software world is a lot faster-moving and a lot more iterative. It can be a lot more open to consumer feedback and quickly find product-market fit. So in the next year, I expect the software roadmap to accelerate and ship faster. It’s already one of our strengths. People here love our software, so I think it’s only going to become stronger and stronger going forward, and we made some great hires to the team recently. So that’s innovation on the smartphone side.
I think on the smartphone hardware, we still have to play it safe. We’re a small player. We’ve reached 1 percent market share, but we’re the smallest, so we have to play it safe, do more innovation on the software.
On creating an ecosystem of products:
The ecosystem is our vision. From the very beginning, we’ve wanted to build it in a thoughtful way. I think laptops is really hard, because I think to make a real ecosystem, you have to control both the hardware and the software. There’s very limited things we can do on a computer form factor, if we’re running Windows as an example. But in the Android is open source, so we can do a lot also with our audio products. So that’s still the ambition.
On whether a Nothing or CMF-branded tablet is in the pipeline:
Not yet.On his AI vision:
The reason why I think we should stop using the word AI, is that it’s just a spec. Similar to the processor or the memory. I think for me, AI is a once-in-a-generation technology to improve the way, or change the way we currently use our devices. If you think about it, the current devices, they are called smartphones, but they’re not incredibly smart. On one hand, they’re not making us smarter. When the personal computer first came out in the 80s and 90s, it was meant only for the government or the military. By putting a computer on every individual’s desk, people could just take their creativity and manifest it into the world. The smartphone is not that. Smartphones are just making us scroll. Short-form video content is making us waste more time, get more depressed. They’re not making us smarter. I think we can really leverage AI to build a system that makes people more productive.
In the future, software operation will become even more democratised, powered by AI. Right in the future, you don’t even have to be an app developer. You can just have an idea of something you want to see on your phone. So imagine I speak to the phone, tell it what I want, the kind of apps I want, and it generates for me. But in the process, it also learns about me. Over time, it gets a very deep knowledge of who I am and what my needs are. In the future, I don’t even need to tell it what I want, because it’s already built my profile. I think that’s what AI empowers. 
On privacy in the age of AI:
Privacy becomes very important. We have to be super transparent because it’s a new time for humanity. A lot of people are scared about the future. A lot of people are afraid that their jobs will be replaced by AI, and they’re afraid of AI becoming too powerful. We’ve got to be super transparent about everything we have access to and give users granular control. I think the beauty about having a smartphone is also that these devices now have NPUs, so we can, over time, shift more and more of the compute to local and give users full control without uploading to the cloud.
On charging users for AI features:
We will have different tiers. The current functionality will remain free, but I think our approach is that first, we have to deliver value, and only then can we charge for it, not the other way around. We cannot charge for something that is not very useful.
