The state of Google’s hardware program

Google announced a number of major hardware releases last year, from its well received Pixel and Pixel XL smartphones to a big move into the smart home market with its Google Home hub. According to CEO Sundar Pichai in a recent earnings call, “hardware sales continue to be strong,” and the company saw a notable boost to revenue in the latest quarter, reaching $24.7 billion in the first quarter of 2017.

Of course, much of Google’s revenue still comes from advertising, which accounted for 86.5 percent of last quarter’s revenue. “Other revenues”, which includes hardware, cloud services, and its various Play Store, music, books and other ventures, accounted for $3 billion in revenue, up from $2.1 billion in the same quarter last year. There’s clearly been growth, but unfortunately Google hasn’t broken out the exact sales figures for its various hardware products. Even so, there have been some telltale signs that give us a glimpse into Google’s hardware performance.

Pixel smartphones and Ara

We all know that Google’s Pixel handset arrived to much critical acclaim and won praise numerous times for its camera quality. The phones’ higher price point than the old Nexus range was controversial for some, but the Pixel and Pixel XL are targeting the top-tier segment of the market, positioning Google directly against Apple and Samsung. So far, this strategy appears to be working, complete with huge amounts of advertising.

Reports suggest that Pixel phones accounted for approximately 12 percent of US phone activations over the holiday period. In terms of figures, this puts US sales estimates in the region of 500,000 for the fourth quarter of 2016, with numbers for global sales calculated to be somewhere between 1 and 1.5 million. It’s worth noting that this was the first quarter following the launch of the Pixel and Pixel XL, making this a very decent result.

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To put this in some perspective, Samsung is anticipated to have sold some 15 million Galaxy S7 phones during its launch quarter, and Apple some 75 million plus units. Of course, we’d prefer some actual figures for a more accurate comparison, but it’s clear that the Pixel range has a long way to go before catching its competitors. Even so, this is a very promising start for a brand without any previous consumer recognition making its debut in one of the most competitive markets. Reports of limited stock availability also help to paint a picture that suggests there’s some serious demand for Google’s smartphones.

Looking forward to the seemingly inevitable refresh later this year, Google has the all important carrier connections in the US, has built up a notable presence following an aggressive marketing campaign, and has also made solid expansions into a number of territories around the world. People may not have known Google as a phone maker before the Pixels, but they certainly knew Google. Now the phones are out, the Pixel line-up certainly looks to have a solid base going forward.

Before leaving the topic of phones behind, we should also mention Project Ara – the now abandoned modular smartphone project being worked on by Google. Ara was axed back in September 2016 after around three years of development, delays, and changes in direction. A modular smartphone was always an ambitious project and it seems that Google couldn’t find a way to unify this idea with its other product lines.

The Smart Home

Another major announcement from Google in 2016 was the launch of its Google Home smart hub. According to estimates from Evercore, around half a million units shipped in 2016, making the hub pretty much as popular as the Pixel smartphone is in the US.

While this isn’t a bad figure for a product that has only been on the market for a few months, Amazon’s Echo has managed to scrape out a notable advantage during its more than a year head start. For comparison, it’s estimated that there are some 7 million Amazon Echo users as of January 2017, leaving Google with a lot of catching up to do.

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Amazon also has an advantage in terms of app integration and the range of commands available, something that Google is actively working on also. While the Google Home hardware is very good, we’re still waiting for some deeper integration before we expect Google’s ecosystem to really take off. That could very well change this year with Google Assistant being opened up to third-party developers and Google I/O right around the corner.

Google’s Chromecast range is the company’s best selling product line by quite a margin.

Google has been more successful in the home in other areas though, with the company’s Chromecast and Chromecast Audio selling in much greater numbers. The latest Chromecast Ultra revision brings support for 4K and HDR content streaming, ensuring that the tech stays up to date with the latest growing formats. In terms of sales, the company breached the 30 million mark and managed to sell 5 million of the little devices in just two months during 2016. This segment certainly seems to be Google’s biggest selling in-house hardware product.

Google Cast compliant hardware from third party manufacturers, or ‘Chromecast Built-In’ as Google calls it, also began to appear in force last year. A variety of smart TVs, speakers and soundbars can now be found equipped with Google’s wireless streaming technology, further increasing the technology’s market share. Google certainly sees the living room and even the entire home as an important part of its strategy, as the recent launch of its $129 Wi-Fi unit seems to confirm. Google also has the OnHub router in its hardware stable.

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Chromebooks and Education

Chromebooks have been another success story for Google in recent years, with this range of devices helping to snag an increasingly notable share of the laptop market. Last year, shipments grew by an estimated 38 percent compared with 2015, totalling 9.4 million units for the year.

For some perspective, PC shipments totalled 270 million for the year, so Chromebooks are still a very small part of the overall picture. However, analysts expect sales numbers to hit 12 million in 2018 and 17 million by 2023, despite the fact that the PC market continues to decline. Perhaps most notably, in Q1, 2016 it was reported that for the first time ever, Chromebooks outsold Apple Macs.

Google is working with manufacturers on the latest batch of touchscreen and foldable tablet-style Chromebooks, and is planning to bring Android apps to more products in the range. Unfortunately, Android app support currently remains in beta form and is proving to be very slow to arrive. However, adding Android app support to many existing Chromebooks is going to be a core part of Google’s Chromebook strategy going forward bringing extra functionality to consumers and undoubtedly attracting even more.

It hasn’t all been smooth sailing for Chromebooks though, with Google’s own Chromebook hardware, the Pixel range, appearing to not perform as well as third party models. In August 2016, Google announced that it wouldn’t be restocking it’s expensive Chromebook Pixel 2, after the $999 model had already been discontinued.

The immediate assumption is that the Chromebook Pixel 2 simply isn’t selling in enough numbers to warrant another run off the production line. Criticism that at $1000 to $1300 customers can get more features for their money from a Windows laptop or Mac are certainly warranted, and it seems clear that the range just doesn’t have the same impact at the premium tier.

As we’ve seen over the past two years though, Chromebooks have been solidifying their position in the education sector. Throughout 2016, Chromebooks accounted for 58 percent of the 12.6 million devices shipped to US primary and secondary schools. Meanwhile shipments of iPads and Mac laptops bell to 19 percent from around 25 percent and Microsoft products actually overtook Apple.

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The low cost nature of Chromebooks certainly helps when it comes to mass purchases on a limited educational budget. Combined with the cloud based nature of its office suite and a selection of dedicated education tools, we can see why these devices have proven so popular.

Low cost Chromebooks have become a big winner for Google, in both the consumer and education markets, and they certainly aren’t going anywhere. Once Android apps are officially delivered en masse, expect a renewed surge in Chromebook interest and an even stronger product portfolio to come.

Wrap Up

Google likes to cast a wide net and it’s clear that some of its hardware initiatives have worked out better than others. Going back to figures temporarily, Google’s “Other Bets” category of ventures, which includes self-driving cars and the company’s X Labs projects, continues to make a loss. This totalled $855 million in the first quarter of 2017, up from the $744 million it lost during the same period last year.

Still, the company’s core product ranges – smartphones, home products, and Chromebooks – appear to be performing quite strongly. Of course, Google has a lot of software initiatives too, some of which have also been more successful than others. See Google Allo, Duo, and Android Wear 2.0.

Interestingly, looking forward, Pichai claims that Google is “transitioning to an AI-first company” and so we’ll likely see an even bigger focus on Google Assistant software across hardware devices over the coming year. We’ll probably hear much more about artificial intelligence, and perhaps some new hardware initiatives, at the company’s upcoming Google I/O 2017 event.

By | 2017-05-12T06:00:04+00:00 May 12th, 2017|Android Related, Just the Tablets|0 Comments

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