Following flops, modular smartphones must pick up the pieces

The end of Google's Project Ara and disappointing sales of LG's G5 raise the stakes for the slick modules of Lenovo's Moto Z.

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LG's G5 introduced a modular design but few modules.

Last week's news that LG incurred a massive loss in its mobile division comes as a blow to a handset maker that had seen its fortunes rise with the release of the G3 and G4. Those handsets made progress against Samsung as it discarded popular features such as microSD support with the sleek Galaxy S6 series. But the company's fortunes have come reversed since the release of the G5, the signature feature of which is its modular design.

See: 10 best smartphones for the 2016 holiday season

Many smartphones -- and even feature phones before them -- have long had some degree of modularity. They've supported replaceable batteries (or battery packs as popularized by Mophie), memory cards. Bluetooth accessories have included keyboards and headsets (really just outplaced speakers and microphones), as well as some pretty small Bluetooth speakers.

There have even been a number of attachable Wi-Fi cameras introduced by brands such as current digital imaging powerhouse Sony and digital digital imaging pioneer Kodak, although those haven't offered much advantage over a standalone camera beyond the phone's connectivity.

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Google's cancelled Project Ara device

Of course, these phones are a far cry from the configurability of the defunct Project Ara or even similarly conceived modular cases. However, they represent a baseline of how much extra value modular phones actually provide. Indeed, the few internal modules available for the LG G5 include the awkwardly named Hi-Fi Plus with B&O Play, an audiophile-level digital/analog converter and amplifier that one review called "the only LG G5 module worth buying, but you can't get it in the U.S. right now" even though it described an awkward process for juggling the G5's battery with the new module. In addition to the audio module, LG offered the far more affordable Cam Plus that simply added an ergonomic grip and shutter buttons.

Once you scratch below the surface appeal and factor in the baselines, though, modular phones offer many questions. What do consumers really want to upgrade in a phone? Do the modules offer a compelling upgrade over the base components? Will add-ons be used often enough to bring them along? How big is the market for phones that have, say, mediocre screens but best-in-class add-on cameras?

See also: Will modular handsets save the smartphone market, or destroy it? | Why neither Apple nor Google can win this war with China | The coming iPhone apocalypse | Google kills Project Ara modular phone

Following the cancellation of Project Ara amidst Google's new hardware push and the LG G5 floundering, Lenovo's Motorola brand has emerged with the best implementation of a modular phone design in the Moto Z. Unlike the G5, which has to be turned off to switch modules, the Moto Z modules snap on to the back of the device without having to turn the device off. Those modules have included an extended battery pack by Incipio that includes wireless charging, a JBL-branded speaker with kickstand, the $299 Moto Insta-Share pico projector (that extends Lenovo's embrace of the technology with the Yoga Tab Pro line), and a 10x "True Zoom" camera add-on by Hasselblad, a premium photography brand that one might never have expected to be associated with a smartphone.

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The Moto Z Play and Hasselblad True Zoom Moto Mod.

Jason Cipriani/ZDNet

The audio and especially projector modules are great examples of add-ons most users would use only occasionally. And while virtually everyone appreciates better photos, the True Zoom camera essentially provides point-and-shoot camera quality, a far cry from the medium format quality photography for which Hasselblad is known.

In addition to the convenient method by which modules attach to the Moto Z, Lenovo has integrated their software well. For example, when the relatively simple battery pack is attached, placing the phone on a Qi charger provides status status for both the internal and external battery. There's even a facility to upgrade the firmware on the battery via the Moto Mods app. But it's even even more preferable to have a large battery and wireless charging as part of the phone (as it is on, say, the Galaxy S7 Active) and not having to deal with separate firmware.

Back in June, Lenovo launched a $1 million Moto Mod design competition to entice developers to create a compelling module. But, as for all Moto Mods, their commercial potential is tied to the success of the host phones, which have very small market share. And, of course, not every Moto Z buyer will purchase every or even one functional Moto Mod. The paradox is that challengers such as LG and Lenovo are attracted to the idea of a modular phone to differentiate from Apple and Samsung. Apple and Samsung, though, while in the best position to create a module ecosystem, continue to strive for the thinnest form factors and the tightest integration of components.

The promise of modular design couldn't prevent the cancellation of Project Ara and the poor showing of the LG G5. As implemented by Lenovo, the Moto Mod system has yielded some intriguing add-ons that meaningfully expand the Moto Z's capabilities. However, unlike the magnetic Moto Mods themselves, the market appeal of a modular smartphone has a hard time sticking.

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