Apple and Samsung Could Be Dethroned by Asus' Radical New Device

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When it comes to the U.S. smartphone market, it's mostly a two-horse race. Cumulatively, and sell two out of every three smartphones, with smaller manufacturers such as HTC and Motorola fighting for what's left.

But that could change next year, when Asus brings its PadFone to the United States. The device, powered by Google's Android, is particularly revolutionary and has the potential to disrupt the mobile market.

Asus' PadFone combines a tablet with a smartphone
The term "phablet" has arisen to define phones such as Samsung's Galaxy Note III -- too small to be a tablet, yet too large to be a smartphone: a hybrid of form factors. But Asus' PadFone might be the ultimate phablet: Buyers get both a tablet and smartphone, but none of the trade-offs that traditional phablets entail.

Normally, the PadFone Infinity is a standard, 5-inch smartphone running Google's Android. It has a high-end processor and 13-megapixel camera. In other words, it's largely indistinguishable from many other Android smartphones. But it has one huge advantage over its competitors -- a proprietary dock.

The PadFone Infinity comes with a 10.1-inch touchscreen dock. By inserting the phone into the dock, owners can transform their 5-inch smartphone into a 10.1-inch Android tablet. Take it out of the dock, and you're back to a standard smartphone.

Google would benefit from the emergence of another Android player
Buyers of the PadFone Infinity are basically getting two devices in one. Instead of buying Samsung's Galaxy S4 and a Galaxy Note 10.1 or Apple's iPhone 5s and full-size iPad, consumers can simply get Asus' PadFone. Pricing for the PadFone in the U.S. has not yet been announced, but as long as carriers continue to subsidize handsets, it could be more cost effective for consumers to buy a PadFone instead of two separate devices.

The rise of Asus as a major Android OEM would be great for Google, as the company has reportedly grown uneasy with Samsung's dominance. About two-thirds of all smartphones running Google's mobile operating system are made by Samsung, and Samsung is now starting to steer Android for its own benefit.

Samsung held its first developers conference back in October, where it encouraged Android developers to customize their apps for its hardware; meanwhile, Samsung's Galaxy Gear smartwatch forces owners to use Samsung's app store in place of Google Play.

It's not hard to see why Samsung would do this -- it's pretty easy to make the jump from a Samsung device to another handset running Google's operating system: Anything purchased through Google Play (apps, books, music) easily carries over, while the basic functionality is largely unchanged.

Could the PadFone Threaten Apple?
Apple doesn't have to worry about this: If consumers need iOS, they have no choice but to go with an Apple-made handset. Apple customers are notoriously loyal, possibly because of these lock-in effects -- transferring apps, music, and books purchased through iTunes to Android is difficult or impossible.

But if Asus' PadFone catches it on, it could still take its toll on Apple in other ways. For instance, there is some evidence to suggest that a chunk of Apple iPad owners use smartphones powered by Google's operating system: InfoScout reports that, on Black Friday, 40% of iPad purchases went to Android smartphone users.

But if their Android smartphone also doubles as their tablet, Android owners might have little incentive to buy that Apple-made iPad. Moreover, if the PadFone concept catches on, even some Apple diehards might be enticed to make the switch -- as larger-screen Android smartphones may have attracted some iPhone buyers, so may the savings of a two-in-one device.

A hybrid device that actually makes sense
It's too early to say whether the PadFone will be a hit in the U.S. -- but if priced appropriately, I could definitely see it catching on. Microsoft has been widely criticized for attempting to create a hybrid desktop/tablet with Windows 8, but the hybrid of a tablet/smartphone actually makes sense -- for the most part, Apple's iPhone only differs from its iPad in terms of screen size.

If Asus does find success, it could be a hinderance to Samsung, which has risen to dominate Android -- more competition for Samsung, however, is beneficial to Google. Apple's monopoly of iOS should help it to retain most of its customers, but it could lose some iPad sales, and a few Apple faithful might even make the switch.

Asus' PadFone could be the most significant smartphone released in U.S. next year; investors in the space should definitely keep an eye on it.

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The article Apple and Samsung Could Be Dethroned by Asus' Radical New Device originally appeared on

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google and owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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