Carl Pei: smartphone hardware is stagnant, AI will replace apps with a single OS layer

Summary

Carl Pei, founder of Nothing, makes a blunt call on smartphone hardware: the first war is over. Apple and Google won it, with iOS at roughly 1 billion users and Android at 3 billion. From here, component-level differentiation is largely exhausted — every manufacturer pulls from the same pool of screens, processors, and batteries — and no meaningful hardware breakthrough is imminent.

The next competitive front is the operating system. Pei's core thesis is that AI makes it possible to collapse the entire app layer into a single intelligent OS, with utility apps — weather, navigation, basic tools — absorbed first. Entertainment and social networks like Netflix and Spotify survive longer, but eventually exist as containers within the OS rather than independently launched applications. The transition has to be gradual; shipping a phone without apps today is a non-starter commercially.

Nothing is positioning itself as one of only four smartphone brands with meaningful scale outside China — alongside Apple, Google, and Samsung. Pei frames that as a structural advantage: the company has already built the supply chain, manufacturing relationships, and global distribution across 40+ countries required to compete. That machine, he argues, makes it relatively straightforward to pivot into whatever form factor emerges next, whether glasses, a pin, or something else. He does not expect a new wearable sensor category to reach mass adoption within two to three years.

On the US market specifically, Nothing is not a priority. The iMessage blue-bubble dynamic creates a near-insurmountable social lock-in that RCS adoption has not resolved. Pei describes the US as a barbell-shaped market — ultra-premium and sub-$100 burner phones dominate, with roughly 20% of the market at the low end — and says Nothing needs a few more years before it has a product differentiated enough to force carrier conversations.

Globally, the key price threshold is around $300. Nothing manufactures primarily in India, where government export incentives have made the country the second-largest smartphone production site by volume after China. Pei credits that incentive structure, not raw capital deployment, as the replicable model for any government serious about domestic manufacturing.

The company's financials are more substantial than its public profile might suggest. Nothing has 750 employees, holds 0.2% global market share, has crossed $1 billion in cumulative revenue, and is tracking toward $1 billion in revenue for 2025. Design remains the primary purchase driver among its users, though the company is increasingly investing in software differentiation. Its current devices run Whisper and Gemini for on-device transcription and meeting summarization, and its earbuds carry a ChatGPT voice integration accessible via a single button press.

On crypto and stablecoin wallet integration at the OS layer, Pei is dismissive, citing a lack of real product-market fit beyond Bitcoin as a store of value. Visual intelligence features he views as a long-term bet — directionally correct but not yet a daily-use behavior for most consumers.