The Long Premium Game

Walk into any coffee shop in Phoenix, Arizona, or Skyharbor International airport terminal, and you will notice something you'll see across this entire nation. It is a sea of Apple logos and white wireless earbuds. For a long time, the premium smartphone market in the United States has felt like a closed book. Apple holds about 70 percent of the space for devices priced at $400 and up. It is a massive moat. Some analysts assumed Android was permanently relegated to the budget brackets, serving the under-$400 segment where devices are commoditized and margins are razor-thin.

But we are starting to see the opening moves of a much longer game.

I spent some time looking back at a couple of fascinating interviews with Rick Osterloh, who now heads Google’s unified Platforms and Devices division. If you follow this space, you know Google reorganized to put Android, Chrome, and Pixel hardware under a single leader. This was a massive structural shift designed to increase velocity, especially around on-device AI.

When you trace Google's hardware journey over the past six to seven years, you realize this was a highly deliberate, long-term experiment. In 2016, when Osterloh first took over, the Pixel hardware team was literally two people. They had to build a world-class hardware organization from scratch. It took acquiring HTC's smartphone division, building custom Tensor silicon, and iterating year after year to get the fundamentals right.

In a wide-ranging Stratechery interview with Ben Thompson, Osterloh laid out why this long-term premium focus is necessary for Google:

The model that we grew up with was this industry layered structure is what wins. In a market where everything is mature, you have people that are integrators at the PC and supply chain managers of the PC layer. Then you have Intel, and chipmakers, and OS maker, and that's how the industry structure works, that was what we were taught as the PC industry model. But the phone business broke that, where it turned out to be, you actually really had to be strong at R&D and the integration components were so difficult that it looked much more like an R&D and engineering centric business, than it did an operations and supply chain centric business.

Osterloh went on to explain that the market under $400 resembles the old PC market, relying on standard software and merchant silicon. But the premium space requires solving novel problems:

Everyone is. That comment primarily pertains to what you might consider to be - I think the market's really different in the premium end of smartphones, versus say, call it under $400, super different, the under $400 segment probably resembles the PC market more. Where you're using standard software, you're buying silicon from merchant silicon providers, you're buying components, and you're trying to do a good job integrating, being efficient, and also probably doing some cool stuff in the UI and brand to make consumers interested. But on the premium end, you're solving novel problems frequently.

This distinction is crucial. If you want to build custom cameras, folding displays, and advanced on-device AI, you cannot rely on off-the-shelf components. You must build the silicon, the hardware, and the operating system together.

For years, critics have looked at Pixel’s sales numbers and questioned why Google keeps investing billions in a business that holds a single-digit market share. But they are missing the forest for the trees. Google is focused on building a highly competitive premium tier that pushes the entire Android ecosystem forward, rather than chasing instant hardware volume.

In an interview with Bloomberg, later summarized by Paul Thurrott on Thurrott.com, Google executives made it clear that their goals are different. The goal is to build a solid business that acts as a reference design for what Android can do. Thurrott captured this dynamic perfectly:

Each of the executives admitted that the goal with Pixel isn't to dominate the smartphone market. It has not seen an "avalanche" of switchers, and Pixel will never be "a giant player." That said, "the growth rate is great" and Google is "selling a decent amount" of devices, with Pixel going from 1 percent of the U.S. market to 3 percent in just a few years. "Building a good business" was enough, Osterloh said. Plus, all it has to do is win with AI: Even those with iPhones can and will use Gemini, and "If there's an Android partner that's successful, that's wonderful for us."

As a developer, this makes complete sense to me. Pixel is Google’s direct brand projection. It is their muse. It serves as a reference point for the best of Google's AI and software, showing partners like Samsung what is possible when hardware and software are fully aligned.

And we are starting to see this play out in the data. According to recent reports from Counterpoint Research, Google became the fastest-growing premium smartphone brand in the world in the first half of 2025, posting a staggering 105 percent year-over-year growth on the back of the Pixel 9 series. Even more impressive, after the Pixel 10 launch in September 2025, Google's share in the US $600+ price band rose to 6.1 percent from a mere 0.1 percent in September 2022. That is a massive growth signal in a highly mature market.

But even with that growth, the sheer weight of Apple's dominance creates a fascinating cultural blind spot. I recently had an interaction on a 9to5Google community forum that highlighted this perfectly. I asked a group of users a simple question:

Honest, respectful question: When you would see Android users use Gemini in the exact same way that's available with Siri AI a year ago, what did you think then? Or were there just no Android customers around you for you to be able to see that?

Here's the first response I got back from a user named "Doug" was telling:

I haven’t seen Android users do these things, and the things they did show (photo manipulation, some email re-wording) were already working on iOS with Siri. I'm not sure most android users are seeing the benefits. I know that Google showed off an AI call screening a while ago but Android users were impressed when they saw my iPhone doing it. I don't know if many people just don't upgrade their OS or if there are settings and limitations on some phones?

Doug’s perspective is a perfect illustration of the premium Android visibility problem in the US. When you hold an 70 percent market share, your world is the default. If you do not see anyone around you using Gemini's live translation or on-device intelligence, you assume the technology does not exist or that nobody is using it. But the reality is simpler. There are still very few high-end, premium Android devices in the wild in the US compared to the iPhone. The power users who actually configure and use these advanced features are an even smaller minority. The lack of visibility for these features stems from a physical distribution gap rather than a deficiency in the software. Premium Android is essentially starting from scratch in terms of public visibility.

In our house, my wife Fatima uses an iPhone, and I am consistently on my Pixel. For a long time, the gap between the two felt massive in terms of fit, finish, and fluid interactions. But with the latest Pixel generations, that gap has completely closed. The hardware is stunning, the custom silicon is optimized for the software, and Google’s AI lead is undeniable.

When you look at the premium smartphone market in the U.S., the Android story is not ending. It is actually just getting started. Google spent the last seven years laying the foundation. They built the supply chain, perfected the hardware engineering, and confirmed their silicon strategy. Now, as we enter the era of mobile AI, they have a fully integrated platform ready to compete on the highest level.

Apple might hold the majority of the US premium market today. But Google is finally playing the same integrated game, and they are playing it for keeps.