The BOM represents 46 percent of the Lumia 900's $450 retail price, without a service contract. In contrast, Samsung’s S II Skyrocket—an Android smartphone that has a very similar feature set to the Lumia 900—carries a $236 BOM, and a retail price that is $100 higher, at $550, as presented in Table 1 attached. The Skyrocket’s BOM amounts to only 43 percent of its retail price.
This cost-reduced design reveals a close cooperation between the handset brand, Microsoft Corp., and semiconductor supplier Qualcomm Inc. This cooperation mimics Apple Inc.’s holistic approach to hardware and software development. This has allowed Nokia to produce a smartphone that has high-end features, but employs less expensive electronic components than are used in comparable products based on Google Inc.’s Android operating system.
This teardown cost assessment is preliminary in nature and accounts only for hardware and manufacturing costs and does not include additional expenses such as software, licensing, royalties or other expenditures.
“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, teardown services, at IHS.
“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. 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 Lumia 900 represents a make-or-break effort by Nokia and Microsoft to re-establish their foothold in the smartphone business. While Nokia is willing to accept hardware