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Nokia rakes in decent profit for $20-cell phone

Posted: 03 Jul 2013 ?? ?Print Version ?Bookmark and Share

Keywords:ultra-low-cost handset? manufacturing? teardown?

According to the latest teardown from IHS, the ultra-low-cost handset (ULCH) model Nokia 105 yields a margin of less than 30 per cent, strictly based on hardware and manufacturing costs and retail pricing. The cell phone carries a BOM of $13.50. When the manufacturing cost is added in, the cost rises to $14.20. At a suggested retail price of $20a new low for a ULCH cell phonethis gives the 105 an implied hardware and manufacturing margin of 29 per cent, which suggests modest a profit margin for the Nokia 105, detailed the market analytics company.

"About eight years ago, the IHS Teardown Analysis Team dissected the iconic Nokia 1110 cell phone, a hugely popular device that defined the ULCH segment and had very similar features as the new 105," said Wing Lam, principal analyst for IHS. "We determined that the 1110's BOM was nearly three times larger than the 105'seven when accounting for the black-and-white display used on the old model. Therein lies the 105's secret: By keeping features the same for nearly a decade, the Nokia 105 can integrate nearly all system functions into a single chip, dramatically reducing the cost to produce a cell phone. The 105 allows Nokia to participate in the ULCH market targeting specific regions and consumers."

Preliminary Nokia 105 cost estimates

Table 1: Preliminary Nokia 105 cost estimates (in US$). Source: IHS, June 2013.

Targeting the ultra-low-end allows Nokia to approach the 105's design in a manner that is the polar opposite of the strategy commonly used in the mid to high-end cell phone market, i.e., adding features to products each year, while maintaining the same BOM costs and pricing.

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