The profit margin Nokia makes on its Lumia Windows Phones and its new $26 feature phone is the same according to an executive within the company.
While discussing the company’s aggressive move into the ultra-cheap smartphone market with the Nokia 105, Nokia’s Director of Platform and Technology Development, Peter Wang told China’s YNet that the profit margins were the same for its feature phones and smartphones. That’s notable since Nokia’s recently launched Nokia 105 feature phone sells for $26 while the Nokia Lumia 920 without a contract will set users back $499.
According to Wang, that other Chinese feature phone manufacturers have flocked to Android in droves means only Nokia can play in the ultra-cheap phone space. Wang cites internal numbers that show these manufacturers can’t make an Android device for less than $50.
Although we couldn’t find a specific language on Nokia’s website detailing which operating system the Nokia 105 uses, we believe it is a variant of Symbian. If that’s true, Symbian’s relatively low-end hardware requirements would be Nokia’s ticket to lower manufacturing costs.
According to Nokia, there about around 2 billion people in China who don’t have a cellular phone of any kind. Nokia hopes that the low pricing will entice these people to buy the device in droves and make up for the low margins with bulk sales.
Though Mr. Wang doesn’t indicate what Nokia’s smartphone margin is, that it’s so low that it can even be compared to its feature phones is telling.
If the company is trying to focus on getting devices into more users hands and make up for the low margins like it’s doing with the Nokia 105, that would be news. Other high-end competitors like Apple’s iPhone focus on creating popular consumer devices with high margins and then driving down the price of components that are used to create the handset.
The cost of Windows Phone also has to factor into the margin of each Lumia smartphone as well. Microsoft requires each Windows Phone manufacturer to purchase a license for every Windows Phone device sold. We currently don’t know how much that licensing fee is.
Currently, Nokia set to detail the future of its Lumia line at an event in London on May 14th.