General Director of Yota Devices Vladislav Martynov on the development of Russian smartphone

From the moment when the head of "Rostekhnadzor" Chemezov Dmitry Medvedev presented the prototype of "the first Russian smartphone" has been more than two years. This winter, the smartphone was finally introduced at the Consumer Electronic Show in Las Vegas, in an interview with "Kommersant" Mark Miller, CEO of Yota Devices, which developed the device, described the company's development strategy, which it expects to counter the market leader, and tried to explain why buyers should make a choice in favor of the Russian smartphone.
— How much is the project YotaPhone?

— The exact figure is not, we know it at the end of the year when sales begin. Now all the figures quoted — it's speculation. We are developing a new type of device that no one before us did. Accordingly, as the development of this device we solve a number of engineering and industrial problems. The cost of which to predict with high accuracy is difficult, the final price will we know when to release the product to market.

— Who gave us the means to development?

— Investments provide shareholders (their names in the Yota Devices do not disclose, claiming that it belonged to private persons. —"Kommersant"). In addition, in 2012 we sold more than 1 million modems and routers (which amounted to 6% of the global market for LTE-devices) and profits from these sales have invested in the development of a smartphone.

— What is the overall strategy Yota Devices?

— We work in a very dynamic market, where everything changes very quickly, so plan on more than three years does not make much sense. There is a development plan for three years, we adjust each year.

In short, it is important for us to make the first successful smartphone, concluding deals not only with Russia but also with two or three global operators to sell 1 million units in the first 12 months after launch. Reinvest the profits in the second generation smartphone. Run it in 10-11 months after the first, and sell a few million units, significantly expanding the geography of countries in which our phone. If we sell a million and a first device now and five to ten million with a second — it's still a very small share of the smartphone market, but it held a competitive global business.

Also, we are working hard to ensure that global operators have bought modems and routers. This helps us to build long-term relationships with operators and offer not one, but a whole range of products.

— Chapter "Rostekhnadzor" (co-owner "Skartel", from which the company was dressed Yota Devices) Chemezov showed a concept of the smartphone Dmitry Medvedev two and a half years ago. Why develop smartphone was delayed?

— First, the major manufacturers of smartphones that have been established all production processes, relationships with suppliers of components that have a skilled team of engineers, with the approval of the concept and to release the phone in mass market goes from half to three years. If it is a phone that offers the market something new conceptually, such as the Nokia Communicator, then most, three years, and if this is another model with an improved appearance and specifications, the usual — a half or two years.

We develop a conceptually new type of device, and we have time to do it in three years. In this case, unlike the major manufacturers, we are creating from scratch all the infrastructure team, build relations with suppliers of components. And do all this for the first time in the history of Russian hi-tech-industry.

Second, we had originally planned, our phone will support LTE. Before approving the project and start to implement it, it was important to understand when Russia will have LTE-network, which will cover most of the cities in Russia. There was no point in making LTE-phone, when there would be no LTE-network. Therefore, the project decided to start in the summer 2011, when there was a clarity to the future of LTE-network in Russia.

And third, we make a premium product. For this purpose, the component suppliers were the leading technology companies in the world. Negotiate with them unknown company from Russia and was a non-trivial challenge.

It is now among our suppliers, companies such as Qualcomm, Japan Display, Corning, Epson, Eink, but until recently it was very difficult to convince these companies to invest in our project their engineering and manufacturing resources.

— What were the arguments in the negotiations?

— Different providers are different. But there were three arguments that I have used almost always. First — we have fresh and very promising idea, we believe in it and we will do our best to implement it.

Not all at once understood and believed, but our perseverance has helped us to convince the first mid-level managers and get a direct dialogue with the leaders of these companies. And as soon as they began to pick up, it could be the next revolution of smartphones that will invigorate the market, our suppliers have expressed interest in working with us and be partakers of the project.

It really helped us to get the price of components, which are comparable to the prices for major manufacturers of smartphones, despite the fact that our volumes will be significantly less.

Second, we clarified the partners that this project is important for the whole country, to the construction and development of the Russian segment of the market in consumer electronics and engineering capabilities. About how important it is that the first Russian smartphone has entered the market and became successful. Many international players are very interested in our market, and they realize that together with us they can take a significant share of the market.

Third, they saw a strong team that is able to successfully implement this project. I managed to assemble a team of 50 people, including former employees of Nokia, RIM, LG with years of experience.

Sometimes we had to talk about a number of global projects that have been implemented by me to convince suppliers that Russian managers are able to build and develop a successful global business. The most striking example was the fact that some managers Yota in my time working with me, have successfully crisis management and saved from bankruptcy by the largest global partner of Microsoft business applications.

— Participated in the talks Denis Sverdlov, the former CEO of Yota, and now Deputy Minister of Communications and Mass Communications?

— Dennis directly in negotiations with suppliers and contractors did not participate, but thanks largely to Denis this phone was released. He was the first who came up with the idea, he filled it with meaning and ideas on how you can use the second screen. He helped develop a business case and convince shareholders that this project has potential. The award, which we received in Las Vegas (YotaPhone recognized as the best mobile device according to the Internet portal Cnet), — it is confirmation that Dennis was right, and before anyone saw the prospect of this idea.

— YotaPhone — a Russian smartphone? What are its elements and components are designed and manufactured in Russia?

— If you call a Finnish Nokia phones, smartphones, RIM's BlackBerry Canadian, American and iPhone, the YotaPhone — uniquely Russian phone. Neither Nokia, RIM or do not produce their own components. Apple has only recently acquired the CPU manufacturer (company FreeScale), and before that used the iPhone to third-party compo
nents.

We YotaPhone our idea — what elements and technologies used in the device and how they put together that device has a unique user characteristics. Our ID-design, use cases and applications for the second screen, the architecture of the device. Our investors and our management of the project.

Thus, the Russian YotaPhone what is the most intellectually far-reaching and important in the value chain and the division of labor in the global market of smartphones and gadgets.

In the initial phase of the project in 2011 and early 2012, we have attracted leading international consultants in the hardware of today's smartphones. But we have less appeal to them, as we were able to form its own engineering team and we continue to actively develop it. Today, our specialists are involved in the development and optimization of hardware devices, antennas, integrated iron and all of the software product.

— At the beginning of last year, Industry and Trade Ministry had the idea to develop with Yota chipset for smartphones. But in the spring Yota has agreed a partnership with the American Qualcomm. The idea of creating the Russian chip die?

— To me from the Russian manufacturers of chipsets is not accessed. So something specific to comment on me hard. I will only be happy if there will be Russian suppliers of chipsets, batteries, displays and other components whose characteristics are superior in complex Western. I am happy to consider them for use in our devices. But so far I have not heard or faced with such manufacturers. To date, chipset Qualcomm, which we use, it is best that there is in the market for Android-based phone.

Do you have a task to make a smartphone based on the Russian element to the assembly in Russia? Is there such a desire in "Rostekhnadzor", the state?

— We are a private company. It is very important to combine the interests of users of our devices, shareholders and our desire in the future to use the Russian element base with the assembly in Russia. We have recently started and taking the first steps in this business. Immediately grasping for megazadachi would be wrong. When we prove that we can create a competitive device, we are able to sell on the global market, then it makes sense to set more ambitious goals.

To date, the competitive element of the Russian base, we do not see, and the assembly in Russia is much more expensive than in Asia. It is important to remember that the world's leaders in the production of hardware components are investing heavily in the development of next-generation chipset, batteries and other accessories. Moreover, they have a long history of production and customer relations. Russian companies have no such history, nor the ability to make such investments. This must be created from scratch.

I believe that the situation can change, but this project is not for a year or two. This system work for fifteen years.

— What you take out patents, while inventing a smartphone?

— There are three groups of patents, patent applications we have filed three years ago. The first — the format of the device. Smart phone with two screens, one of which is a full-length EPD-display. The second — the application and usage scenario of the second display. Third — curved shape of the second display.

— There are devices that you take as a model? You get patent claims from manufacturers of smartphones?

— No, we have invented and developed a new type of device that we have patented it, and, thank God, there were no complaints. I am a single device with such a design not seen. Design of the device, which showed Mr President, has evolved. Initially it was a phone with a four-inch screen and a symmetrically curved second display. The final version of YotaPhone with a screen of 4.3 inches and the asymmetric shape of the second display.

Which networks LTE-smartphone should work?

— That all frequency bands that are in Europe and Russia.

— What are the Russian cellular operators you test over LTE smartphone Russian operators?

— We would like to see "Skartel" and "Megaphone" was among the first Russian operators that will test our smartphone networks LTE. But we are willing to work and test our smartphone, as well as our routers and modems together with any Russian operators are interested in partnering with us.

— How many YotaPhone will be delivered to the market in the first game?

— I think a few thousand devices on the eve of launch will be distributed between mobile operators, retailers, market experts, who will test them, give us feedback, and will predict demand. The first order will depend on the weather, the numbers may be different — from 20 to 70 million smartphones. Definitely will initially launch sales on the Russian market. It is easier and more intuitive to do that here.

— What is the sales strategy in Europe, the United States?

— There Twenty operators, each of which has a set of countries in which they are presented. We meet with the operators are trying to enter into contracts for the supply of our phone. Each of them tells himself, in which country he wants to run YotaPhone. And then we will adjust to their frequency.

— Not afraid to compete with the Chinese manufacturers of smartphones both in the domestic and global market?

— Risks very much, and they are everywhere. Starting from the issues with patents, which you touched on, ending the dumping aggressive marketing programs, which make Chinese producers. We think through our response and how we will minimize these risks. We hope to be faster, we hope to be more creative, to implement those features in the product that they can not implement. Chinese people often focus on the cost and lose as a product. We believe that quality should be impeccable. Plus there are markets where dislike Chinese products. In Europe, Scandinavia, Germany, there is a request for higher quality products. And the Chinese have no desire to adapt to it.

— What is the cost and retail price YotaPhone?

— Cost varies, we do not know what it will be final. This is a very delicate process control throughout the supply chain and production. I can say that we have achieved cost components of our product is comparable with major brands who bought tens of millions of copies. This suggests that we can achieve competitive prices for the consumer. The price will be comparable to the prices of flagship Android-based phones from Samsung, HTC and other manufacturers.

— Cheaper 20,000 rubles fail?

— It depends on our ability to reduce costs, they will not compromise on quality. If we succeed, then maybe.

— How will you provide the content for your smartphone? Will there be a deeper integration with the Russian Internet services, such as "by Yandex"?

— We are in talks with companies Bookmate, we begin negotiations with "by Yandex." Our potential partners — the social network "in contact", Facebook, Twitter. We think to hold talks with Groupon. Our task — filling the smartphone content that will effectively work on the second screen with the maximum amount of useful applications.

— Will you create a wrapper for Android?

— From my point of view, Android has to be intact. We do add to the developers SDK, so you can quite easily import an application on the second screen or develop a new one. Were fair comment on the network — say, who need to develop applications for the phone that is not on the market, and it is unclear how much they will sell. We therefore their applications are now dozens of them, and to launch the phone in the sale will be more than twenty. But I&
#39;m sure that as soon as the phone appears on the market, there will be software companies that will offer users YotaPhone interesting applications.

— When you start an advertising campaign?

— I think that in September. We have spent on the development of number is much less than the spend on developing a core global product brands. We do not want to go in a standard way, when companies spend huge money on television advertising.

— Do you expect promotion YotaPhone by the country's leadership and implementation of the smartphone through the state order?

— We are building a competitive business, and any pressure from above, from my point of view, cause rejection of users. Most importantly, the people who go to an electronics store to see our phone, wanted to buy it. And buying it, they liked to use it every day. After our phone will buy one hundred thousand people and we will have the information we will take into account when creating the second generation of the device, we will understand something new. This can give us the scale and it will be much more important than government support, so we have it — in the background. Although the success of brands such as RIM, Nokia, Apple, Huawei, is difficult to imagine without the support of the Governments of Canada, Finland, the United States and China.

— The exhibition Consumer Electronic Show in Las Vegas in January of this year, producers showed less prime than a year earlier. Why is that in your opinion?

— Only one thing: the fact that the smartphone manufacturers a crisis of ideas. Last revolutionary idea was proposed six years ago in the first iPhone. This dramatically changed the pattern of user interaction with the smartphone. After that smartphone manufacturers began to increase technical capacity: increased resolution of the camera matrix, processor speed, changed the size of the screen, its resolution is increased, but there is nothing conceptually new user did not come up and offered. And what if the innovation and were then essentially only at the application level. For example, no one was able to solve the problem of smartphone users when they are faced with more battery power. The smartphone — a device with the mass of the various applications that you use constantly, and with your active life rhythm, charging your smartphone is not always enough for the day. For this problem, we proposed a solution in the form YotaPhone EPD (electronic paper display. —"Kommersant") At the rear.

— It is true that the EPD-display can not be blocked, and because of that you can accidentally delete something. How will you respond to criticism about the flaws?

— Well, first of all, it's not. EPD-on display, in principle, nothing can not be removed because it, unlike the LCD-display, designed for reading books and various documents, notifications and display of images and information that you want to see on the display constantly.

Secondly, the exhibition in Las Vegas, we showed a prototype and not the final product. Our objective was to get feedback professionals, consumers, market experts — how much in demand and our idea is viable.

Of course, we have work to do to bring the device up to a premium quality, but many of the issues addressed by improving the level of software.

At the moment we are testing hundreds of different scenarios of the user with the device. We are also finalizing an antenna for more reliable and stable signal reception, develop new applications for the second screen, and more, not to mention crash tests. Before the smartphone goes on sale, there will be four iterations of prototypes, actively testing each of them, we will bring a commercial sample to the highest possible quality. We still have time for it.

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