Nokia's Lumia 900 smartphone demonstrates a tight partnership between Nokia and Microsoft, which puts its component costs at just 46 percent of its retail price, according to a Wednesday report.
The report, from IHS iSuppli, favorably compared the Lumia 900 to Apple's iPhone, noting the tight integration of hardware and software resulted in a low manufacturing cost.
The Lumia 900 requires $209 in component costs to manufacture, according to IHS, plus an $8 manufacturing cost. The phone is priced at $450, unsubsidized. Samsung's S II Skyrocket, an Android smartphone that has a very similar feature set to the Lumia 900, carries a $236 bill of materials (BOM) cost, and an unsubsidized retail price that is $100 higher, at $550, the firm noted.
"With the Lumia 900, Nokia, Microsoft and Qualcomm have taken a page from Apple Inc.'s playbook by closely tying together the hardware and software to produce a full-featured smartphone that is based on relatively inexpensive electronic components," said Andrew Rassweiler, senior principal analyst of teardown services at IHS, in a statement.
"One of Apple's advantages over Android has been the company's complete control of both the hardware and operating system software, helping it to produce efficient and economical iPhone designs," Rassweiler added. "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. But while Apple capitalizes on its low hardware costs to attain industry-leading margins, Nokia is using this approach to offer an inexpensive phone intended to compete on the basis of price."
The IHS report gives some credence to Nokia's claims that the company is on the upswing. Nokia offered a disappointing outlook for its mobile devices business on Wednesday, but cited the strength of its Lumia sales. During the first quarter, Nokia sold more than 2 million Lumia devices. Furthermore, the company said, Nokia has seen sequential growth in Lumia device activations every month since Nov. 2011.
But while the Lumia has shown strong growth on Amazon's charts, a data connectivity bug has also taken some of the wind out of its sails, and prompted a $100 credit.
"Our disappointing Devices & Services first quarter 2012 financial results and outlook for the second quarter 2012 illustrates that our Devices & Services business continues to be in the midst of transition," said Stephen Elop, Nokia's president and chief executive, in a statement Wednesday. "Within our Smart Devices business unit, we have established early momentum with Lumia, and we are increasing our investments in Lumia to achieve market success."
Specific savings
The Lumia saves money by using a a single-core Qualcomm APQ8055 chip and just 512 Mbytes of RAM. Because of the optimized hardware-software relationship, the performance doesn't suffer because of the cheaper chips, IHS said. The APQ8055 costs just $17, compared to the $22 dual-core APQ8060 used by the Skyrocket. The lower amount of RAM also allowed Nokia to trim $5 off of the BOM cost, versus the Skyrocket.
And the Lumia 900 also probably includes a lower price for the software, to boot, as Microsoft works to establish its Windows Phone platform.
"Given the highly strategic partnership with Nokia, we believe Microsoft substantially discounted its software licensing fees on the Lumia 900 to accommodate the overall lowered manufacturing costs," said Wayne Lam, senior analyst for wireless communications at IHS, in a statement. "Microsoft has had limited success with its previous Windows Phone 7 original equipment manufacturers, such as HTC, Samsung and LG. However, Microsoft now is looking to double-down with Nokia to promote Windows Phone 7 and grow the platform."
For more, see PCMag's full review of the Lumia 900 as well as Nokia Lumia 900 vs. Samsung Galaxy S II Skyrocket: Specs Compared and the slideshow below.
For more from Mark, follow him on Twitter @MarkHachman.
