Nokia makes profit from $20 phone, the Nokia 105, teardown reveals

Amid all the scrutiny on its high-end Lumia Windows Phone smartphones, Nokia is apparently providing a master lesson in how to make a profit from a basic mobile phone that costs only €15 ($20).

The Nokia 105

According to a teardown by analysts at IHS, the ultra-low-cost Nokia 105 has been designed in such a simple and integrated way that the company is able to achieve a modest profit even after materials and manufacturing costs--which total $14.20--are taken into account.

"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 cellphone," said Wing Lam, principal analyst for IHS. "The 105 allows Nokia to participate in the [ultra-low-cost handset] market targeting specific regions and consumers."

The 105 is part of Nokia's 1100 line that targets emerging markets including Africa, India, and Latin America.

"While much attention has been lavished on smartphones, the market for simple handsets remains very important to Nokia," said Wayne Lam, senior analyst for wireless communications at IHS. "Non-smartphones, including ULCH cellphones like the 105, accounted for 90 per cent of Nokia's shipments in 2012."

In the first quarter of 2013, Nokia shipped 5.6 million Lumia products, 500,000 Symbian-based devices and 55.8 million mobile phones, of which 5 million were the lower-end Asha smartphones.

The 105 is based on a single, highly integrated chip, the Intel PMB7900, which combines baseband and the RF transceiver enabling GSM/GPRS functions, IHS said. This reduces the total number of integrated circuits to three, compared to six for the previous Nokia 1110.

Nevertheless, while the ultra-low-cost market is important, Nokia still needs to do more to compete in the lucrative smartphone market. Further scorn was poured on its Windows Phone strategy today: Barron's quoted Bernstein Research analyst Pierre Ferragu as saying that the company should adopt Android before the year is out, "rather than continue to rely on Microsoft's Windows Phone operating system and lower-cost feature phones such as its 'Asha' line."

For more:
- see this IHS release
- see this Barron's blog post

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