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What’s the best built-in feature of Nokia’s $20 phone? A 29 percent profit.

Nokia(s nok) has long been known to focus efforts on emerging markets, areas where network infrastructure and electricity are marginally available. Handsets for these areas often have limited functionality as a result, partially to allow for long run-times on a single charge and also to keep the costs down. So profit margins tend to be slim as well. That’s why I was surprised to hear that the Nokia 105, a $20 feature phone, is estimated to have a smartphone-like 29 percent profit margin built in.

The profit figure comes from IHS(s ihs) which routinely tears down devices to determine the bill of materials (BOM) along with some estimate on product costs. Here’s what the company found when inspecting the Nokia 105:

“The Nokia 105 carries a bill of materials (BOM) of $13.50. When the manufacturing cost is added in, the cost rises to $14.20. At a suggested retail price of $20.00—a new low for a ULCH cellphone—this gives the 105 an implied hardware and manufacturing margin of 29 percent, which suggests modest a profit margin for the Nokia 105.”

IHS notes that the 105 is a follow up to Nokia’s 1100 phone line aimed at Africa, India, and Latin America.

Nokia 105 learnIt’s a relatively basic GSM phone with included FM radio, pre-installed games and SMS services in place of apps: Users can text questions to Nokia Life, for example, and receive answers. So the phone is as about as opposite from a high-end smartphone as one can get. Yet, it carries the profit margin of a flagship device, which can provide a nice profit boost in volume.

Why might Nokia sell hundreds of millions of this device? It’s perfect for its intended markets where electricity is scarce and 3G networks don’t exist yet, let alone LTE. The Nokia 105 provides 12.5 hours of talk time and 35 days of standby time on a charge. It’s also dust- and splash-proof, making it comfortable in hardy locations.

4 Responses to “What’s the best built-in feature of Nokia’s $20 phone? A 29 percent profit.”

  1. Component costs (BOM) are less than cost of goods sold (COGS), and at very low prices you can get some relatively high overhead costs (for things like service, returns) that quickly destroy margin.

    I’d guess they’re looking at honest gross margins in the single digits.

  2. Making excellent low-priced phones is of course one of Nokia’s long-term strengths, but there are also some problems: Asha sales are getting hammered at the high end of Asha’s range by inexpensive Androids, and you have to sell five of these for every $99 Asha to make the same margin contribution.

    The elephant in the room is that Nokia could have those high-end Asha sales back if those devices were running Android.

  3. I’m still waiting to see the (non Asha) 301 in the US at something near it’s msrp. There’s an importer in town that has them for double that. Bleh!