Tech Transformers

Meet the $329 smartphone: But you’ll need an invite

OnePlus may be under the radar of most smartphone fans, but the Chinese company aims to take on the likes of Samsung and Apple. Just one thing: you need an invite to get your hands on one.

The OnePlus 2, the firm's second smartphone, went on sale on Tuesday amid much hype online. Over 3 million people are on a waiting list for the device and the and in the first wave of orders, the company expects to ship around 30,000 to 50,000 devices.

The Chinese brand has built up much of its following through social marketing – devices can be purchased on an invite-only basis and it engages fans via social media and forums.

Commentators have said that OnePlus's invite system is an attempt to build hype around the product, but the co-founder, told CNBC that it's about practicality.

"The best scenario would be to sell as many phone as possible. There is no sense of limiting availability, it is more of a risk control thing," Carl Pei, told CNBC in a phone interview.


"More companies suffer due to too much inventory than to too little sales. We can't make more phones than we sell and then have to discount them and sell them at low margin.

Apple users switching?

OnePlus joins a line of companies selling high-end phones with a low price. The OnePlus 2 starts from $329, half the price of the iPhone 6. Consumers have been happy to buy phones out of contract as prices of devices begin to fall but quality improves, a trend Pei said has helped the company.

"I think because of the smartphone category maturing, consumers who buy smartphones can tell a good product. That is why Apple is growing so fast. People are moving beyond the basics like specs and moving towards design, materials and build," the founder said.

OnePlus has launched the device in 36 countries across the world but only held a sale at Collette, a department store in Paris, on Tuesday. Similar to Apple's famous product launches with queues forming outside, Pei said there were around 400 people but admitted there was not enough stock for the event.

"We didn't bring enough phones, we have more phones on the way. For the remaining people we took their emails and we have that we will ask them to collect and if not deliver," Pei said, adding that the company made a loss during the event due to selling via an offline channel.

Still, Pei said he was encouraged to see a number of people with iPhones queuing up to buy a OnePlus2.

"From anecdotal evidence, around 60 percent of customers were using iPhones. The majority were Apple users looking to switch. We always wanted to make the best product and have the most discerning users switch," he told CNBC.


But as the brand looks to grow quickly, the challenge will be to keep the business tight. The cheap price at which it sells its phones online and direct to consumers allows it to make a very thin margin. But as soon as it sells via other channels, like Amazon in India, the margin takes a hit. Pei told CNBC that OnePlus broke even last year but won't do the same this year. Still, it "won't make a big loss".

OnePlus is not the only handset maker selling high-spec phones at a low cost. Chinese smartphone company Xiaomi as well as the likes of Lenovo-owned Motorola are in the same game.

Analysts said that OnePlus is tapping into a specific tech-savvy user base and is likely to remain a small player.

"It shows that in a market where you have such enormous volume there are little niches you can go after and they are tapping into a niche," Ben Wood, chief of research at CCS Insight, told CNBC by phone.

'Focus on scale'

The major players such as Apple and Samsung are trying to move towards ecosystems with mobile payments and services they can offer to trap users.

But Pei said that OnePlus is focusing on building scale first.

"The short-term the goal is to focus on scale. If we were to focus on software and services now, the user base is too small to make an impact in terms of revenue," Pei told CNBC.

Despite being a small player, Pei has big ambitions.

"The smartphone industry will consolidate and there will only be two or three main players left, and when that happens we hope to be one of the ones remaining," the founder said.