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The Nokia flagship - one big reason it's still in limbo

Posted: , by Damian M.

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The Nokia flagship - one big reason it's still in limbo

Let me start this piece by saying that I love Nokia. I used to be a power user during the pre-Microsoft era. In fact, my first smartphone was a Nokia X7, when I could easily go for an Android alternative. Come to think about it, that last one was probably a mistake on my part, but that's not the point. The point is that when I found out Nokia is coming back in the smartphone business without Microsoft, I squealed like a little girl presented with a tiny chihuahua puppy.

But then the other news came in – the new Nokia was nothing special. It was just a mid-ranger that didn't bring anything new to the table. And it was China-exclusive. The company that once gave us internal antennas, and even managed to beat BlackBerry at its own game with the E71 was now offering us a generic mid-ranger, and a feature phone that looks exactly like the ones it made five years ago.

Why, oh why did HMD Global decide to revive the Nokia brand with such devices? What were they thinking? Considering how the Nokia 6 is selling like hotcakes, a flagship device would've killed it, right? Well, wrong. For several reasons. Let's take a look at them and speculate a bit on why we don't have a Nokia flagship yet, and why it looks like we won't be getting one in the next few months.

Money


Nokia 150 - the first Nokia under HMD's banner

Nokia 150 - the first Nokia under HMD's banner

Smartphone manufacturing is a business. And one with high costs, too. You have to pay for the devices themselves, you need to arrange transportation, offices, people, marketing, and whatnot. And HMD Global doesn't have that much money.

HMD's starting capital was very far from what Apple and Samsung have at their disposal. The manufacturing cost of a flagship device is somewhere around $250 per unit. Therefore, even if HMD didn't have to pay for offices, salaries, marketing or anything else that's not manufacturing, it would be able to produce a very limited supply. And with such a limited supply, the Nokia flagship would just not be competitive.

For comparison, Samsung sold over 13 million Galaxy S7 edge devices in the first half of 2016. That's $3.3 billion in manufacturing costs alone. Unfortunately, we don't have any information on HMD's manufacturing budget, nor do we know the number of handsets it has sold, but the marketing budgets of the two companies hint towards a massive gap between the South Korean Goliath and the Finnish David. HMD said it will spend about $500 million for marketing, over the course of three years; Samsung spent $14 billion on marketing just the Galaxy S devices in 2013 alone.

But, as we all know, no one walks around with a briefcase of full cash, dropping it on their supplier's desk. There are these nifty little things called credits. Wouldn't HMD be able to get one and start production? Most certainly, but a company that has yet to make its first year or release a second product, and starts off with such small capital will not be able to get a big credit. It's just too much of a risk. Otherwise, everyone would be making flagship smartphones.

The normal margin between production costs and retail price is approximately 55-75%. So, if we take an average of 65%, this would make the manufacturing costs of one Nokia 6 unit somewhere around $150, so it can later be sold for $250. A much cheaper alternative that allows the $100 bucks saved per unit to go towards other much-needed budgets, such as salaries, marketing or the development of a new device.

HMD is starting small, building a business from the ground up. Sure, it acquired a lot of resources, staff and whatnot from Nokia and Microsoft, but this doesn't mean that such a young company can play with the big boys right off the bat.

The alleged Nokia 8 at Qualcomm's CES booth (spoiler alert - It's not even a Nokia)

The alleged Nokia 8 at Qualcomm's CES booth (spoiler alert - It's not even a Nokia)


Strategy


No matter if you're an Android or an iOS user, you must have been excited at least a little bit about Nokia's return. And this excitement clouded people's judgment on the situation, mine included.

No brand has started from the top, except maybe for Apple with the original iPhone, but that was more like creating a new market than actually competing in an established one. Nokia is no exception.

Assuming HMD had the money, suppliers and readiness to make a flagship, and it actually went that way, there's so much that can go wrong. Flagship devices are always a hit and miss thing. Consumers will either love it to bits, or they will shun it as the next worst thing after Pen Pineapple Apple Pen.

And if you're a startup with the first smartphone you actually make, the last thing you want is to get off on the wrong foot. Mid-rangers are the perfect way to avoid large failures – users know they're paying for a phone that's nothing special, and their expectations are not very high. If you make a not-so-good device, most people will merely shrug it off and move on, forgetting about it in a few weeks, so your reputation would be safe. But if you make a solid handset, you could gain some traction and keep moving forward with some extra cash and prestige under your belt.

HMD is bringing back the indestructible Nokia 3310 (Image courtesy of Concept Creator)

HMD is bringing back the indestructible Nokia 3310 (Image courtesy of Concept Creator)


So, what HMD is actually doing here, is playing it smart. China is a very saturated, but also huge market. Everything even remotely good sells like crazy there. While Western markets are dominated by established brands, and top-quality devices. So it only made sense for HMD to release the Nokia 6 in China.

The device sold out in less than a minute not once, but twice. This speaks for either an unusually low supply, paired with okay demand; or an okay supply, paired with extraordinary demand. Either way, we can safely assume that the Nokia 6 is a commercial success so far. And that's what HMD Global needs to get the ball rolling for the other six devices we expect this year, including high-end ones.

In a nutshell, HMD is starting slow, so it can actually prepare for a safe (and hopefully successful) flagship release, instead of putting all its eggs in a single fragile basket.

When is the flagship actually coming?


The mobile world deserves its former king's return.

I'll be perfectly honest here – no idea. So far, it appears that HMD is betting on feature phones and mid-rangers, trying to create a solid foundation for its higher-end devices. I do believe that we'll get a flagship by the end of the year, but there are ten months to go until then, so it's really hard to speculate on when exactly we'll see the groundbreaking top-of-the-line Nokia.

Whenever it is, though, I certainly hope it's a good one. The mobile world deserves its former king's return.

42 Comments
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posted on 17 Feb 2017, 09:48

1. avishekmukherjee (Posts: 360; Member since: 09 Apr 2015)


Great article
Right

posted on 17 Feb 2017, 10:46 9

11. juandante (banned) (Posts: 679; Member since: 23 Apr 2013)


Listen EVERYONE.

THIS IS JUST A CLICKBAIT ARTICLE : THEY WANT US TO START A WAR SO iPHONEARENA HAVE MORE CLICKS to sell PUBLICITY.

More USELESS comments = More clicks !

Nokia and HMD are in SHAPE. Don't fall in iPHONEARENA trap !

posted on 17 Feb 2017, 17:45 1

27. phoneinf (Posts: 5; Member since: 17 Feb 2017)


Hm what is wrong with this article? It's good that someone keeps track of the new Nokia brand so Nokia brand doesn't do the same bad mistakes as what made them fail in the first time. This article is also very positive about Nokia.

posted on 19 Feb 2017, 05:06

44. yyzamin (Posts: 292; Member since: 26 Aug 2015)


Yet you wrote a comment. Maybe you should stick with android authority or android central. But then again you can't troll on there. Do everyone a favour and dont come back.

posted on 17 Feb 2017, 10:56 3

12. HillaryClinton2020 (Posts: 124; Member since: 08 Feb 2017)


To be fair to Nokia, I think all Android flagships are in limbo this year :)

posted on 17 Feb 2017, 11:33 19

20. NoToFanboys (Posts: 2991; Member since: 03 Oct 2015)


Says the one who's brain is on limbo.

posted on 17 Feb 2017, 09:56 1

3. Valdomero (Posts: 289; Member since: 13 Nov 2012)


It's a great strategy for HMD, they're building up momentum for when the perfect time comes they not only release a great flagship but also have the ability to ship it worldwide. Keep it up HMD, you're doing great! :)

posted on 17 Feb 2017, 10:02 5

4. yann (Posts: 381; Member since: 15 Jul 2010)


Jesus Danian, x7 your first smart phone?!? That was after iPhone 4, Nokia N8, Galaxy S II etc...
And you choose x7? There are much better examples of iconic NOKIA phones. You lost me after that article.

posted on 17 Feb 2017, 10:06

6. SIGPRO (Posts: 1887; Member since: 03 Oct 2012)


Yep but you can't blame the writer, he is probably not that old like some of us.
My first Nokia was a 3210 which was released in 1999. But i got my first mobile phone in 1997.

posted on 17 Feb 2017, 12:32 2

26. amasog (Posts: 443; Member since: 22 Aug 2013)


He lost you? So what? What's the big deal? Who are you? lols! He can live without you. He grew old without you. And i assume, he doesn't even know you. lols!!

posted on 17 Feb 2017, 22:14 1

35. yann (Posts: 381; Member since: 15 Jul 2010)


Damian, is that you? Kid, come down and take the criticism with dignity.
There is one more thing. Autors without readers don't exist. Are you intelligent enough to catch the meaning? I don't think so. Naive kid.

posted on 20 Feb 2017, 02:18

45. Damian.M (Posts: 19; Member since: 01 Nov 2016)


I do admit, it was not the best option. However, at the time I was 16 and I knew nothing about smartphones. I owned a Nokia feature phone before the X7 that I was happy with and decided to stick with the brand.

posted on 20 Feb 2017, 09:03

49. yann (Posts: 381; Member since: 15 Jul 2010)


Thank you.

posted on 17 Feb 2017, 10:04

5. Hallyu (Posts: 680; Member since: 21 Jul 2015)


There's only one Nokia and it has been assimilated with Microsoft. This fake Nokia is a dangerous bite with left over part from uncertified Chinese factory.

posted on 17 Feb 2017, 10:09 11

7. SIGPRO (Posts: 1887; Member since: 03 Oct 2012)


Think you need to do some homework! HMD Global is based in Finland and the employees are from Nokia and Microsoft!
Yes the phones are made in china just like the iphone for example!
Nokia is making the designs and stuff so this is not fake Nokia.........do some homework!

And there is not only one Nokia.......Nokia never died like many of you think!
They are doing many things not only phones!
Nokia exists since 1865......let see if Apple or Google can survive for so long!

posted on 17 Feb 2017, 11:01 7

13. meanestgenius (Posts: 16747; Member since: 28 May 2014)


You are absolutely correct. I cannot green thumb you enough for your comment. Too many people just don't know that HMD is more Nokia than Microsoft Mobile ever was. And too many fanboys of other companies are actually too afraid at the thought of what a Nokia comeback could actually mean for said companies in the smartphone industry, ignorant of the fact that completion is what's best for the consumer, as is choice.

posted on 17 Feb 2017, 11:14 2

15. FlySheikh (Posts: 421; Member since: 02 Oct 2015)


Meanest Genius gets it.

posted on 17 Feb 2017, 11:28 1

18. meanestgenius (Posts: 16747; Member since: 28 May 2014)


Thank you. It's too bad that more people here don't "get it" as well.

posted on 17 Feb 2017, 11:59 4

24. Subie (Posts: 1340; Member since: 01 Aug 2015)


Hallyu gets it too. He just hates it because it's not korean.

posted on 17 Feb 2017, 12:21 2

25. meanestgenius (Posts: 16747; Member since: 28 May 2014)


That's unfortunate. Such hate is, and has always been, absurd and absolutely ridiculous.

posted on 17 Feb 2017, 17:52

29. phoneinf (Posts: 5; Member since: 17 Feb 2017)


But to be honest it's extremly hard to comeback and try to live on it's name and past history. 10 years of derping around will be extremly hard to comeback from if ever. Now I wish they to have great success but they will have to do something magical to be able to compete with Huawei...

posted on 17 Feb 2017, 18:01

31. meanestgenius (Posts: 16747; Member since: 28 May 2014)


No one said that it's going to be easy, but I believe that HMD/Nokia can do it. And if the sales of the Nokia 6 are any indication, then they're already off to a great start.

posted on 18 Feb 2017, 05:39

38. phoneinf (Posts: 5; Member since: 17 Feb 2017)


Anything sells in China. That's not an indication of anything really. They haven't done anything special so far. They are still behind. Not even a high end phone.

posted on 18 Feb 2017, 06:25

40. SailfishOS (Posts: 99; Member since: 06 Nov 2016)


But nokia has a massive following in india... I bet Nokia 3 is headed there. Lets see if it sells.

posted on 18 Feb 2017, 10:15

42. meanestgenius (Posts: 16747; Member since: 28 May 2014)


It's a good indication for a company that's just released their first Android smartphone. And everything doesn't have to be high end or flagship material right out of the gate. Not everyone wants or needs that. And of course they're still "far behind". They just released the the Nokia 6. What were you expecting? 50 million out of the gate? Let's use logic here. Nokia still has a huge following after all these years. I have no doubt that they'll be able to sell smartphones in good numbers elsewhere, including a flagship, when released.

posted on 17 Feb 2017, 10:11 1

8. Valdomero (Posts: 289; Member since: 13 Nov 2012)


Lol, some people just want to see the world burn...

posted on 17 Feb 2017, 10:15

9. johnh3 (Posts: 106; Member since: 23 Aug 2012)


Very good article. HMD Global is not Samsung or Huawei with all the money/resources. I think we see a Nokia flagship but not on MWC 2017. My guess probably at the IFA event in Germany.
But I am happy to see the return of the Nokia brand.

posted on 17 Feb 2017, 11:06 2

14. meanestgenius (Posts: 16747; Member since: 28 May 2014)


I've always personally thought that the best way for HMD/Nokia to go was to start off small with low-to-midrange handsets and work there way up to the flagship-level smartphone. They're playing it smart, gauging their success and testing the waters....once they have enough capital and see that they can sell units, they'll break out the flagship that so many of us are waiting for. Good luck, HMD/Nokia! I have faith that you can do it, and look forward to your eventual flagship!

posted on 17 Feb 2017, 11:17

16. FlySheikh (Posts: 421; Member since: 02 Oct 2015)


Your opinion on that is a near reflection of my thoughts.

posted on 17 Feb 2017, 11:29

19. meanestgenius (Posts: 16747; Member since: 28 May 2014)


It's such a sound strategy. I'm surprised that more people don't see it the way you and I do.

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