Analyst says that Nokia could reduce cost of producing Lumia models by 17%

Analyst says that Nokia could reduce cost of producing Lumia models by 17%
Earlier on Wednesday we told you that how well the Nokia Lumia 800 sold during its European launch depended on whose viewpoint you are looking at. While analysts called the demand for the phone tepid, the Finnish based manufacturer said it was the best launch it has had recently. Regardless of which side you believe, Barclays Capital analyst Jeff Kvaal says that Nokia could reduce the cost of producing its Windows Phone handsets by 17%.

According to the analyst, the cost of materials for the Nokia Lumia 800 is $238 and is $167 for the Nokia Lumia 710. With the phones priced at 420 EUR ($560) and 270 EUR ($360) respectively, the analyst believes that Nokia could sell a lot more phones by offering a model priced at 220 EUR ($293); to make this a possibility, Kvaal suggests that Nokia substitute some parts and remove others. The majority of the savings would come from a smaller screen size and a lower quality display along with lower priced memory and processor.

For example, instead of the 3.7 inch "ClearBlack" screen on the Lumia 710, the analyst recommends that Nokia put a 3 inch TFT screen on the lower end device. While the "ClearBlack" technology reduces glare and makes for a more pleasing display outdoors, replacing the screen with a smaller one without "ClearBlack" could shave $5 off the cost of material for the phone. Another $5 could be saved by halving the amount of RAM from 512MB to 256MB.

The Nokia Lumia 800 is a quad-band phone and the Nokia Lumia 710 is a tri-band model, both supporting speeds as high as 14.4Mbps. Kvaal states that further savings could be achieved by offering a model with single/dual band connectivity capable of  7.2Mbps. On the Lumia 710, that would take another $3 off the cost of parts. While both Lumia models currently have a single-core 1.4GHz processor under the hood, changing to a 1GHz processor could allow Nokia to get by with a smaller battery. Going from the 1300mAh cell in the Lumia 710 to a 1200mAh battery would save $2 per unit in production costs without a huge difference in the quality of the phone's operation.

A huge $10 in material costs for the Nokia Lumia 710 could be cut by getting rid of the compass and the back-facing camera. Add in a lower cost supplier of Wi-Fi technology and the phone's printed circuit board, and all together the reductions add up to $38 or 17% off the cost of producing the Lumia 710. And that, says the analyst, is how Nokia could offer a new phone for just 220 EUR.

More savings could be rung up if Nokia sped up the timeframe it has in mind of rolling out its Windows Phone models. If it makes more phones in a shorter period of time, the manufacturer might be able to squeeze out some volume based savings in procuring parts and components. And the beauty of this plan is that it keeps Nokia within the parameters set up by Microsoft for running its mobile OS. Redmond asks for only 256MB of RAM on Windows Phone handsets and no minimum sized battery is required.

Would Nokia be cutting its profit margins by offering such a lower priced phone, even with the cut in material costs? Kvaal points out that Nokia has a 25% profit margin on the higher-end Lumia 800 and a 20-21% margin on the Lumia 710. According to the analyst, making the changes he suggests and selling such a phone for 220 EUR would also result in a 20-21% margin. The only question is, would consumers accept some of the changes such as the smaller screen and the lower amount of RAM? You could argue that any difference in perceived quality could be offset by a lower retail price, but it seems to us that Nokia does not want to position itself as a producer of bargain smartphones.

source: Forbes

Related phones

Lumia 800
  • Display 3.7" 480 x 800 pixels
  • Camera 8 MP
  • Processor Qualcomm Snapdragon S2, Single core, 1400 MHz
  • Storage 16 GB
  • Battery 1450 mAh(9.50h 3G talk time)
Lumia 710
  • Display 3.7" 480 x 800 pixels
  • Camera 5 MP
  • Processor Qualcomm Snapdragon S2, Single core, 1400 MHz
  • Storage 8 GB
  • Battery 1300 mAh(7.60h 3G talk time)



1. ZEUS.the.thunder.god unregistered

at this point of time Nokia needs more high end devices instead of cheap phones. Lumia 800 is a very good device but its not good enough against something like SGS II

2. Yeeee

Posts: 190; Member since: Aug 02, 2011

237$ wtf? It doesnt even have 1 gb of ram or lte or a dual core

7. Birds

Posts: 1172; Member since: Nov 21, 2011

Uni-body, construction you Bat! lol jk. I thought the samething until I really thought about all the complex technology that went into the device. lol I just don't want the excuse of lte is more complex than the rest of that. Nokia spent alot of time trying to design this phone, although the cheaper price would be nice.

3. 7series7

Posts: 4; Member since: Dec 09, 2010

Lets not forget about different software license and patents costs involved which is not included in the hardware manufacturing cost.

4. hepresearch unregistered

The real problem here is: How could the resulting phone still meet the minimum requirements, posted by Microsoft, to run Windows Phone? A 3-inch screen with less than 480x800 resolution? Less than 512 MB of RAM? No built-in compass sensor? If I am remembering correctly, these particular suggested specs are sub-standard for Microsoft to allow their OS to be put on it. It would end up having to run Series 40 Touch-n-Type (Java)...

5. Joshing4fun

Posts: 1245; Member since: Aug 13, 2010

Hey Nokia! This is not the time to be cutting corners!

6. redmd

Posts: 1926; Member since: Oct 26, 2011

I like the idea of a budget wp7 handset as long as it performs smoothly and on par with other wp7 phones. niche no more?

8. Stoli89

Posts: 333; Member since: Jun 28, 2010

Always nice to get an opinion from an analyst on how a company should produce its phones. I guess the CEO should ignore 1000's of years of experience from an army of product development, manufacturing, procurement, and marketing people to take this "experts" opinion front and center. What a joke.

11. dmn666

Posts: 244; Member since: Oct 19, 2011

True! This smartphone era spawned boatloads of so-called experts, analysts, reviewers, etc who are infesting this whole web. Sometimes it gets really hard to deal with their BS.How come a nameless expert tries to teach Nokia phone business. There has to be a limit.

9. DontHateOnS60

Posts: 872; Member since: Apr 20, 2009

So basically this genius wants Nokia to make a piece of s**t, priced way more than it should be, that nobody is going to buy.

10. hepresearch unregistered

Yes. It will be so cheap that it cannot host Windows Phone on board. It will have to be an all-touchscreen Series 40 device costing at least 50% more than the Nokia Asha 303... what a genius way for Nokia to commit suicide...

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