Motorola razr: Industry Impact and Recommendations

Summary

I spent some time with the new razr at Motorola’s Chicago headquarters before the launch. The new razr is as narrow as the smallest current iPhone with a large, long screen that still fits neatly in your pocket. Sometimes a product isn’t about specs, it’s about design and desire – and the razr absolutely nails this. Yes, it’s $1500, it won’t reach consumers until after the holiday sales season, and in the U.S. it’s a Verizon exclusive, but it is extremely desirable.

Analysis

The first folding phones have gotten off to a rough start. Samsung had to delay the Galaxy Fold’s launch to fix durability issues, and Huawei’s Mate X was also delayed before finally launching just in China without Google services. Motorola is taking a different approach. Rather than folding out from a phone into a tablet like the Fold or Mate X, the new razr folds down from a phone into a smaller, more portable form factor. The razr’s unique hinge mechanism makes it look like the screen folds completely flat, but internally the display is never fully folded, so there is no crease (unlike the Fold) and the fragile plastic display is fully protected (unlike the Mate X, where the display is always exposed).

This design won’t be for everyone – it isn’t as seamless to dive into content as a traditional bar smartphone, though Motorola’s quick action display does allow for notification triage and other light use cases. However, the notion of a big phone becoming small is incredibly appealing to consumers with who have been left behind as smartphones have outgrown their hands and pockets. It helps that the nostalgia-heavy design is gorgeous, and the phone feels great to use.

The razr may fit in your pocket, but the $1,500 price will put it out of reach of many pocketbooks. That said, millions of people have spent over $1,000 on phones from Apple, Samsung, and Huawei. A $1,500 price point certainly makes this a luxury product, but it is hardly outrageous. It’s also worth noting that the original RAZR cost $600 on contract – a seemingly insane price for a basic featurephone at the time – and sold millions of units at that price point. People will pay more for a device that they want, especially when it’s also a device they need and use dozens of times a day.

Back in 2005, Motorola quickly abandoned price-based exclusivity and rode cheap RAZRs to 130 million units sold – and eventual financial ruin. Motorola’s current management team is unlikely to make the same mistakes. For starters, the components in the new razr will remain too expensive in the short/medium term to turn the new razr into a budget phone (shortages of the key folding display units are one reason Motorola has little to lose by pricing it high – there is a limit to how many it can make). Second, Motorola is sharply focused on retaining recently hard-earned profitability after years of losing money. While the new razr should sell well, Motorola is also hoping that the razr acts as a halo product, raising its brand profile so that people who can’t afford a razr buy a Moto G series or Moto One phone instead. The Moto G series offer is a terrific compromise between price and performance, so investing in brand awareness this way is strategically sound.

Motorola is starting out with a huge software advantage over larger folding phones (and dual-screen phones) under development: when opened, the razr is just a standard Android phone. Motorola does have to make the Quick View external touchscreen work for notifications and selfies, but it does not have to get developers to support continuity or screen-spanning schemes. Phone apps look correct on the razr, unlike Android apps that are blown out of proportion on tablet-sized displays. Google is working on getting developers to build flexible interface designs, and Microsoft is certainly hoping that dual-screen app support is solid before it launches the Surface Duo late next year. Still, it’s been a decade since the first Android tablet debuted, and most apps still don’t change the information density or UI controls for larger sizes. The razr is just a big phone that gets smaller.

The razr Will Appeal to Apple Users

The razr is not a phone that is designed to sell based on its specs, but on its desirability. There are a lot of consumers – especially women – who do not care what processor is in their device, they want a phone that fits their needs. In this case, that is defined by being small enough to hold comfortably with a large screen, yet also fits in a small jeans pocket – all while being very, very cool. The razr should far over-index on people switching away from iPhones, as Apple also appeals to this same group of fashion-oriented people shopping on “fit” and not specs.

Motorola and Verizon should anticipate this; Motorola should post video instructions on how to switch from an iPhone to a razr, and Verizon’s retail staff should be given additional training on how to help customers transfer their data in store.

The razr’s hinge design ensures that there is no crease on the display, and the area where a crease would be feels perfectly smooth to the touch (unlike Samsung’s Galaxy Fold, which I had on hand for comparison). Motorola is confident that the razr is durable enough for regular use, but it is still an expensive device using new technology, and it is not waterproof or sand-proof. If you try to break it, you will. If you’re extremely rough on phones, this might not be the phone for you.

Motorola is backing the razr with an exceptionally strong warranty; if there are any defects with the device or display that show up with “normal use,” it will be covered. Motorola will even send users a new phone before they send back the broken one. If consumers destroy the phone by accident (or on purpose), a new display will cost $299.

Motorola also puts its competition to shame with packaging that seems appropriate for a $1,500 product. The company expects people to keep the box and use it as a stand; unfortunately, the stand is not able to be used as a charging dock, which is something the company should work on in the next version.

Concerns

There are two batteries in the razr that combined offer up just over 2,500 mAh, which is not great on paper, but the razr runs on a relatively efficient Snapdragon 710, not a flagship 855. Motorola claims that it will last a full day of use; we won’t know if this is an issue until we can test units over time. The 16 MP camera is another potential weak point, certainly when considered against other $1,000+ phones that have better primary imaging along with zoom and wide-angle lenses. However, performance is unlikely to be an issue for the razr’s target audience; the preproduction unit we tested was responsive.

The razr does not have 5G. This is not a concern at this time in the U.S., even at this price point because there are few 5G networks to connect to. It is a minor consideration in Europe, but may be an issue in China in the coming months.

In the U.S., the razr is a Verizon exclusive, which is good for the carrier and neutral for Motorola. Wider distribution would be better, but Verizon will back the razr with ad spending, and the carrier has been Motorola’s main backer in the U.S. for several years. Motorola insisted that this razr will not come to other U.S. carriers, which suggests that it has variants in development, potentially with other feature sets.

To save space, there is no physical SIM slot, making the razr the first eSIM-only phone in the U.S. Motorola told us that the eSIM slot will be temporarily locked (Verizon locks all of its phones for 60 days to prevent theft/resale) but it should work on other carriers afterwards. What that looks like on an eSIM-only phone remains to be seen; it is unclear if it will be possible to move the razr to other U.S. carriers or MVNOs. Global roaming operators may also be shut out if consumers need to give up their Verizon eSIM in order to install a temporary one for, say, a European vacation.

Competitive Landscape & Recommendations

OEMs

Motorola won’t have the market to itself for long. Samsung’s software division already “leaked” (i.e., announced at Samsung’s Developer Conference earlier this month) that the company is planning for its own vertical folding phone, so Motorola won’t have the market to itself indefinitely. Samsung should be able to claim better cameras, broader U.S. carrier distribution, 5G, and it could use a higher performing chipset if it can squeeze a bigger battery in there somehow. Still, the new razr builds on the original RAZR’s iconic design. Nobody remembers Samsung’s SCH-U340 all that fondly. Still, Motorola will need to introduce razrs for other carriers quickly or Samsung will fill the demand.

TCL has been watching Samsung, Huawei, and Motorola and is quietly planning its own line of foldables (or not so quietly – it keeps showing off design prototypes at trade shows). TCL is part of a multi-billion-dollar conglomerate that makes its own folding display panels and has been investing in unique hinge mechanisms. As long as folding phones cost $1,500 - $2,600, there should be plenty of room for alternatives at lower price points.

Apple offers a unique ecosystem. As noted above, the razr will have a better conversion rate against the iPhone than Google’s Pixel simply because design-centric consumers are more likely to leave the Apple fold to get a razr than to get just another technically proficient phone. There may be markets where the razr’s luxury appeal materially impacts iPhone sales, but in general, Apple can safely watch the folding wars from the sidelines for the next couple of years. If the razr is a runaway hit and creates an entirely new category – the way that Samsung’s ever-larger displays drove Samsung’s dominance in Android phones from 2012 – 2016 – then Apple will have to actually build the folding iPhone it surely has in the design labs today. I would not expect this to happen until 2021 at the earliest.

LG and Microsoft are eschewing folding phones for dual screen options. LG’s G8x ThinQ with Dual Case is half the cost of the razr, though its use case is entirely centered on multitasking. LG can make a reasonable argument that the G8x ThinQ offers more flexibility than a Samsung Galaxy S10, but it is not likely to appeal to the razr buyer at all. Similarly, Microsoft’s Surface Duo will be competing against next-generation folding phones that promise better productivity, not against the razr.

U.S. Carriers

AT&T has an exclusive on Samsung’s Galaxy Fold. While not aimed at the same customer as the razr, it is a folding phone, and it elicits excitement when people see it. AT&T originally sold the Fold at a handful of AT&T retail locations. By early November, that had increased to over 500 stores, which is still less than a quarter of the company’s total. To compete with the razr, AT&T should broaden the distribution throughout its company-owned store network, promote the Fold as a holiday gift – it will be the only folding phone in the U.S. this Christmas – and work with Samsung to significantly bring down the cost of the phone by late January when the razr is actually available for purchase.

That leaves T-Mobile, Sprint, and MVNOs such as Xfinity Mobile and Spectrum Mobile without a folding phone to sell in the short term. As most of these brands are value-oriented, it is unclear that a $1500 fashion phone would be an ideal fit in the first place, so they should make the lack of the razr a virtue and emphasize the latest phones from Apple and Samsung at lower prices.

Verizon has an exclusive on the razr in the U.S., and it should invest heavily in promoting it as a unique halo product for its network. It should also offer switcher discounts that bring down the cost somewhat and improve Verizon’s customer base at the expense of rivals. The only problem is that the razr won’t be available for purchase in time for the holidays. Verizon may want to steal an idea from toy merchandising and sell empty boxes. When Star Wars debuted in May of 1977, Kenner had the toy license, but couldn’t get products to market in time for Christmas. Instead, Kenner sold Early Bird Certificate Packages, which were mostly empty boxes with a certificate for action figures to be received by mail in the Spring of 1978. The program was a huge success. Verizon should do something similar, starting preorders before Christmas and providing an IOU and an accessory in a gift-wrapped box that customers can give to their loved ones on the holiday.

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[Updated December 2, 2019 with additional AT&T retail store detail.]