​Startup lands $100 million to challenge smartphone superpowers Apple and Google

With a Firefox OS offshoot called H5OS, Acadine Technologies hopes to succeed where Microsoft and others have failed. A China-run backer has begun paying the bills.

Acadine Technologies CEO Li Gong speaks in March, when he was still Mozilla's president.
Acadine Technologies CEO Li Gong speaks in March, when he was still Mozilla's president. Stephen Shankland/CNET

A new startup emerged Wednesday with a new mobile operating system to challenge the dominance of Apple's iOS and Google's Android -- and it's backed with a whopping $100 million investment.

Acadine Technologies and plans for the new H5OS operating system were shrouded in secrecy since the Li Gong, the company's founder, chief executive and chairman, left his previous job as president of Firefox browser developer Mozilla at the end of March. Now his Hong Kong startup has revealed its business strategy and its funding is from an ambitious Chinese state-controlled company expanding into technology markets.

Acadine, which CNET previously reported was initially known by the placeholder name Gone Fishing, plans to build an operating system for smartphones, tablets, wearable devicess and the Internet of Things.

That'll be a tough challenge. But Gong believes Acadine's generous funding, fast development and international reach will mean consumers finally will see the alternative to Apple and Google that so many other companies have failed to build.

And of course that means his startup and its investors will reap the rewards. "Owning an OS is extremely important if you can do it," Gong said. "It's very profitable if you can do it."

A big challenge

Potential sources of money, Gong said, include being paid to promote services like search, storage, music streaming and e-commerce; revenue sharing from those services when customers pay to use them; and fees generated by advertising and game sales. All of those, though, depend on Acadine succeeding in finding and exploiting gaps where existing OSes are weak then expanding from there to a large user base.

The list of mobile operating systems that have struggled to compete against Android and iOS and gain that large population of users is long: Microsoft's Windows Phone, Samsung's Tizen, Jolla's Sailfish OS, Canonical's Ubuntu, Hewlett-Packard's WebOS, BlackBerry's BlackBerry OS and Mozilla's Firefox OS. This last project is the one Gong led at Mozilla until he left in April, and it's the starting point for H5OS.

Even having Firefox OS as a starting point won't make things easy. For the 334.4 million smartphones that shipped worldwide in the first quarter of 2015, 78 percent of them ran Android and 18.3 percent iOS, leaving all other OSes to scrap for the remaining 3.7 percent, according to analysis firm International Data Corp.

A $100 million vote of confidence

Acadine raised the funding from Hong Kong-based Tsinghua Unigroup International, a subsidiary of the Chinese company Tsinghua Unigroup that in turn is controlled by Tsinghua Holdings. This latter organization is run by the Chinese government and funded by the prestigious Tsinghua University in Beijing.

"I am very excited to support Dr. Gong and the team he has assembled to establish a truly open mobile operating system," Tsinghua Unigroup Chairman Zhao Weiguo said in a statement. Zhao has led Tsinghua Unigroup's recent high-tech expansion -- its $1.8 billion acquisition of smartphone chipmaker Spreadtrum in 2013, $907 million acquisition of phone radio chipmaker RDA Microelectronics, and $2.3 billion takeover of Hewlett-Packard's enterprise computing technology business in China. On Monday, the Wall Street Journal reported Tsinghua Unigroup also is making a bid for US memory chipmaker Micron.

Acadine will be independent, though, Gong said, noting that he is both chairman and CEO. "We are not a China company, we are not a US company, we are an international company," Gong said.

Along with its Hong Kong headquarters, it's opened other offices in Beijing and in Taiwan's capital, Taipei, and has labs in London and Palo Alto, California.

Firefox OS ties

Firefox OS is open-source software, meaning that Acadine and anyone else is allowed to copy its underlying source code, modify it and ship it as a different product. And Acadine has more than just the code: of the company's more than 70 employees hired since its founding in March, about 40 are from Mozilla, Gong said.

At the same time, Mozilla is retooling its Firefox OS effort. CEO Chris Beard concluded Gong's strategy of aiming for very low-cost smartphones flopped and now is focusing on a product that enthusiasts can install on their unlocked Android phones.

Beard said in June that Mozilla decided it needed to change Firefox OS management. Gong said the decision to depart was mutually agreed upon.

Mozilla also has lost its chief technology officer, Andreas Gal, to a separate startup. Sources said in June that Gal had been considering working with Acadine and taking an investment from it, but Gal said he's looking investors closer to his Santa Clara, California, headquarters. "We are in the process of raising venture funding in Silicon Valley," he said.

Mozilla declined to comment for this story.

Building on the Web

Acadine's operating system, like Mozilla's Firefox OS and Google's Chrome OS, runs Web apps -- software written with the same technologies used to build Web pages. For operating systems trying to challenge incumbents like Windows, iOS and Android, Web apps have two big advantages.

First, there lots of programmers are already familiar with foundations of Web software like HTML content, JavaScript programs and CSS formatting, and indeed many mobile-optimized websites are already available. Second, every modern operating system has a browser, so a Web app is useful on existing operating systems as well as new ones.

Firefox OS is aimed today chiefly at smartphones, though electronics manufacturer Foxconn has used it on tablets and Panasonic offers it on a 4K TV. Acadine also expects to offer its operating system on wearable devices -- smartwatches are the best example today -- and on "Internet of Things" devices -- products that are that of spreading network connectivity beyond today's computing devices.

Acadine expects to diverge from Mozilla's open-source Firefox OS project where it makes sense. Eventually, Acadine could end up with something completely different, Gong said.

"Firefox OS, for which project I was the owner and primary driver in my last job, has definitely broken fresh ground in mobile operating systems and has demonstrated the viability of a new Web-centric approach in a field dominated by Android and iOS devices," Gong said. "Nevertheless, to achieve market success we have to go much further than that. We must move and scale up at the supersonic speed of the mobile industry, be pragmatic and flexible, and look beyond Silicon Valley for inspiration."

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