Nokia Spends Only $209 for Lumia 900 Components
A recent tear down revealed that the Lumia 900 costs only $209 to build, which is twice AT&T’s price for the handset or nearly half of Lumia 900’s unsubsidized price, $450. The $209 material costs don’t include the average manufacturing cost of $8. Qualcomm, Microsoft and Nokia duplicated Apple manufacturing method by closely tying software and hardware together to achieve greater efficiency during production process. Microsoft and Nokia worked closely with Qualcomm during the development of Lumia 900, to fully take advantage of the hardware by optimizing the software stack.
To achieve a significant margin, Apple chooses low cost components and put them together into a premium package. Nokia is attempting to use a similar approach by offering affordable phone, both Microsoft and Nokia are willing to get lower profit margins to gain stronger foothold in the phone market. Today, Windows Phone OS only represents less than 3 percent of the market. It’s also believed that Microsoft significantly reduces the software licensing fee to ensure a low manufacturing cost. Previous Windows Phone handsets released by LG, Samsung and HTC met with mediocre sales. Now, Microsoft is willing to give Nokia a special treatment. The Lumia has nearly the same manufacturing cost with the Samsung SII Skyrocket at $236 or 43 percent of the $550 retail price. Nokia can keep the hardware costs down by using single core processor and less DRAM, while still maintaining comparable user experience with the Galaxy SII Skyrocket.