(The following is a reformatted version of a press release
issued by IHS Media Relations and received via electronic mail.
The release was confirmed by the sender.)
Even at a $20 Price, Nokia 105 Cellphone Proves Profitable for
Nokia, IHS Teardown Reveals
El Segundo, Calif. (June 28, 2013)--Is it possible to sell a
mobile phone at a price of $20.00 and still make a profit?
With its ultra-low-cost handset (ULCH) model designated as the
105, Nokia has shown how it can be done: by sticking to a
limited set of features and employing a highly integrated
design. The Nokia 105 yields a margin of less than 30 percent,
strictly based on hardware and manufacturing costs and retail
pricing, according to a physical dissection of the cellphone
conducted by the Teardown Analysis Service at information and
analytics provider IHS (NYSE: IHS).
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.
The attached table presents a summary of the IHS teardown of the
Nokia 105. This teardown assessment is preliminary in nature,
accounts only for hardware and manufacturing costs, and does not
include additional expenses such as software, licensing,
royalties or other expenditures.
“About eight years ago, the IHS Teardown Analysis Team dissected
the iconic Nokia 1110 cellphone, a hugely popular device that
defined the ULCH segment and had very similar features as the
new 105,” said Wing Lam, principal analyst for IHS. “We
determined that the 1110’s BOM was nearly three times larger
than the 105’s--even when accounting for the black-and-white
display used on the old model. Therein lies the 105’s secret: By
keeping features the same for nearly a decade, the Nokia 105 can
integrate nearly all system functions into a single chip,
dramatically reducing the cost to produce a cellphone. The 105
allows Nokia to participate in the ULCH market targeting
specific regions and consumers.”
Targeting the ultra-low-end allows Nokia to approach the 105’s
design in a manner that is the polar opposite of the strategy
commonly used in the mid to high-end cellphone market, i.e.,
adding features to products each year, while maintaining the
same BOM costs and pricing.
The no-frills phone
The 105 extends Nokia’s 1100 line, targeting emerging markets
including Africa, India, and Latin America. The phone supports
long talk and standby times, which are valuable in regions with
poor power grids or frequent shortages of electricity. The
features of the phone are very simple, with just talk and text
“While much attention has been lavished on smartphones, the
market for simple handsets remains very important to Nokia,”
said Wayne Lam, senior analyst for wireless communications at
IHS. “Non-smartphones, including ULCH cellphones like the 105,
accounted for 90 percent of Nokia’s shipments in 2012.”
Phone on a chip
In terms of design, the 105 owes its low costs to a single,
highly integrated chip: Intel Corp.’s PMB7900. The PMB7900
combines baseband and the RF transceiver enabling GSM/GPRS
functions. With so much functionality packed into a single
device, the 105 contains only three integrated circuits in
total--compared to six for the 1110.
“This is the fruit of nearly a decade’s worth of integration,”
Wing Lam said. “By riding Moore’s law and holding the line on
features, Nokia has gone from six discrete integrated circuits
(ICs) to just one core device plus two other ICs.”
The other two ICs in the 105 are the SKY77580 transmit module
from Skyworks as well as a NOR flash device from Micron.
Collectively, these three ICs dominate the baseband/RF
transceiver/memory subsystem and, when combined with supporting
passive components, carry a cost of $5.25, representing 39
percent of the 105’s total BOM.
The cost of color
Despite support for color, the 105’s display carries a cost of
just $2.25, or 17 percent of the total BOM of the phone.
Nokia has kept this cost to a minimum by employing a TFT-LCD
display with a low resolution of 128 by 128. This display
technology is very mature and is available in high volume. In
the individual 105 model examined by IHS, the display was made
by China’s Tianma Microelectronics. But there are multiple
suppliers of this component, with competition among them further
contributing to keeping the price down.
For more information, please contact:
Senior Manager, Editorial
Direct: + 1 408 654 1714
Mobile: + 408 921 3754
IHS Media Relations
+1 303 305 8021
About IHS (www.ihs.com)
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