How Nokia makes cash on a $20 cellphone — Quartz

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Nokia’s ultra-low-cost handsets may not be as horny as the most recent iPhone or Samsung Galaxy. However they’re a much-needed supply of money for the ailing Finnish firm, in addition to a staple of the telecom networks of the creating world. When you—like a superb lots of the folks on earth—want a cellphone that’s water- and dust-resistant, can final a month on standby between fees, and solely prices $20, Nokia’s new Nokia 105 is the best way to go. And even at this worth, reveal the business analysts at IHS, Nokia is earning money on the cellphone.

The whole price of the supplies and manufacturing of the Nokia 105, estimates IHS, is $14.20. Throw in different unknown prices, like advertising, software program, licensing, royalties and distribution, and Nokia is perhaps making a mere $5 per handset, or much less. Right here’s the breakdown for the foremost elements, which doesn’t embody meeting:

  • Show: 1.4″ Colour TFT 128×128 Pixels, $2.25
  • Radio, CPU, Reminiscence, (3 chips): Skyworks, Intel, Micron, $5.25
  • Mechanical / Electro-Mechanical: Enclosures, Connectors, PCB, $3.50
  • Field Contents: 800mAh Battery, Charger, and Field , $2.50

The Nokia 105 is sort of similar in options to Nokia’s iconic 1100 mobile phone, which included elements that, eight years in the past, price no less than 3 times as a lot as those within the new Nokia 105. Within the meantime, Nokia has lowered the variety of microchips within the 105 to 3, from the six that had been within the 1100. By retaining the cellphone’s options mainly the identical, the traditional development of expertise means the identical system at a a lot lower cost—precisely what the creating world, and Nokia, wants.

Nokia stays the second largest cellular handset maker on the planet by quantity, and telephones just like the 105, which symbolize 90% of the corporate’s gross sales (the opposite 10% are true smartphones just like the Nokia Lumia) are key to its technique of getting “the following billion” onto Nokia-branded telephones and, hopefully, retaining them there as they improve to smartphones. In some respects it’s a determined gamble: Within the first quarter of 2013, Nokia had a web lack of $357 million, following a staggering $1.2 billion loss within the final quarter of 2012. Even when the 105 is a runaway success, the margins on these telephones are so low they will’t can stem the tide of crimson ink.

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