Lumia 900 materials cost $209, point to low-cost approach by Nokia, Microsoft

11.04.2012
The materials used to build the Nokia Lumia 900 smartphone cost $209 -- well above AT&T's price for the phone of $100 with a two-year contract, but just 46% of Lumia's $450 retail price with no contract.

That's the finding of IHS iSuppli, which did a physical teardown of one of the new Lumia smartphones. The $209 cost for materials does not include an additional $8 for manufacturing.

Nokia, Microsoft and Qualcomm mimicked Apple and its iPhone by closely tying together hardware and software in the new phone to produce greater efficiencies in production, IHS said.

"For the Lumia 900, Nokia and Microsoft worked in close partnership with Qualcomm to develop and optimize the software stack in order to take full advantage of the hardware," Andrew Rassweiler, an IHS analyst, said in a statement.

With the iPhone, Apple uses low hardware costs and a relatively high retail price to win industry-leading margins; Nokia is using a similar production approach to offer an inexpensive phone that competes on price, he added.

Both Nokia and Microsoft are willing to lower their profit margins to gain a foothold in the smartphone market, IHS concluded. Currently, Windows Phone represents less than 3% of the smartphone market.