This Is the Best US Phone Maker You've Never Heard Of

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Blu Products is changing what "cheap smartphone" means in America. With its second Editors' Choice phone, the amazing $49 Blu R1 HD, the best little smartphone maker you've never heard of should vault to the top of any price-sensitive buyer's list.

Blu is actually the No. 1 seller of unlocked smartphones in the US, according to Strategy Analytics. Unlocked phones are devices not sold through wireless carriers, which can generally hook up to multiple carrier systems. Only about 10 percent of phones in the US are sold unlocked, but that number is growing. Apple has sold unlocked iPhones through Apple stores for years, and Samsung recently introduced an unlocked Galaxy S7.

But Samsung and Apple have a way to go to beat Blu in the unlocked US market. The Miami-based maker sold 36 percent of the 14.6 million unlocked phones Americans bought in 2015, leaving bigger global players in the dust.

Blu's key is value for money. Unlocked phones are typically purchased at full price, up front. Where flagships from Apple, Samsung, and HTC all hit the $600 mark, Blu's most expensive phone costs $349. Its two Editors' Choice devices, the R1 HD and the Blu Life One X, cost under $200.

"We don't inflate our costs with anything that doesn't bring value to the consumer," Blu founder and CEO Sammy Ohev-Zion told me. "Our marketing budget is close to zero. We use partners as much as we can. We have a very lean organization, and we do what we do very well."

Blu has been around since 2009, but focused on Latin America for its first few years. We've been tracking Blu since 2013, and it has been improving very quickly. Its early phones, such as the Blu Life Play, were affordable but lacked LTE and had some serious performance and reliability issues. But its devices have gotten a lot better, and recent models have nearly stock Android and fine AT&T and T-Mobile LTE support.

The company co-develops a few devices, like the Blu Pure XL, with Chinese manufacturer Gionee. But most of the company's lineup is designed in-house: industrial design is done at Blu's headquarters in Miami, engineering is done by 100 or so employees in China, and all the factories are outsourced, Ohev-Zion said.

Blu Energy XL back

There are a few downsides to running on a shoestring. Blu phones won't work on Sprint or Verizon, because the company won't shell out for the testing to make the devices work on those restrictive networks. And Blu hasn't done very well at providing Android updates for its phones, something Ohev-Zion says he wants to improve.

"As much as it pains us sometimes to not be able to update a device, consumers should understand that for the price they're getting, sometimes they may have to make a sacrifice. It's not something we're happy about, it's something we're dedicated to improving, and we have some exciting things that we are going to announce soon about working together with Google that will improve how updates happen," he said.

Blu on Your Corner
Blu has also cracked a secret of unlocked distribution, according to wireless execs I've spoken to. They sell a lot of phones through Amazon and Best Buy. Partnering with Amazon for the R1 HD, Ohev-Zion said, is all about raising the profile of low-cost, unlocked phones as an option in the US.

What you don't see, shopping online or in national retail, is how pervasive Blu has become at corner stores and little electronics shops in immigrant and low-income neighborhoods, where products are purchased with cash.

At those local stores, Blu phones get paired with prepaid SIM cards from carrier brands like Simple Mobile, Lyca Mobile, and Ultra Mobile, some of which specialize in offering lots of cheap international calls. I live in a heavily immigrant neighborhood of New York City, and there are posters for these companies pasted every few yards along one of our major commercial streets. If you've never seen a Blu phone in the wild, maybe you've never ridden the E subway line in Queens or the Miami MetroRail.

Blu got there by being the first US-based, low-cost manufacturer focused on the online market, Ohev-Zion said. When Blu first entered the US market, 95 percent of phones were carrier-locked, creating a real opportunity, he said. The little guys wanted phones to pair up with their prepaid SIM cards, and there weren't a lot of affordable options.

"There was no way in the US to source an unlocked product three or four years ago. Nobody knew what it was. When we went into these stores, they absolutely fell in love with the product, and we created a very strong distribution channel."

There are other companies here in the States running by the same playbook: Posh Mobile and Verykool come to mind. But our reviews have shown that Blu has been able to lap those other players on product quality and features.

"Blu is uniquely positioned, because we were the pioneers in unlocked. We went after the unlocked retail market, we were the first ones, and we helped create it," Ohev-Zion said.

Bring on the Local Heroes
Blu is the American contender, and one of the most successful, in a group of phone makers I call the "local heroes," which focus on their local markets rather than starting with a global strategy.

Wiko in France and Cherry in the Philippines partner with big Chinese makers. Wileyfox in the UK and General Mobile in Turkey have springboarded off of Google's Android One low-cost white-labeling strategy. Micromax, Karbonn, Lava, and Spice in India are big enough to develop their own devices.

Apple, Samsung, and the carriers have a lock on most of the US market. About 90 percent of US phones are still sold by carriers. According to Bay Street Research, 91 percent of "postpaid" phones sold in the US—that's on the most mainstream kinds of contracts—are Apple and Samsung.

"The premium smartphone market has fewer and fewer alternatives to Apple and Samsung, and we don't see this changing anytime soon," Bay Street's Cliff Maldonado said.

But there is opportunity, and it's coming at the low end. Blu is showing that you don't have to spend $700, or even $400, to get a solid Android smartphone. Sure, its handsets don't have the audio quality of the HTC 10 or the amazing camera on the Samsung Galaxy S7. But if price matters at all to you, you need to look Blu up.

"Once users have choice, and once buying a cell phone becomes a democracy in the US, once it's not controlled and manipulated by carriers, we win," Ohev-Zion said.

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