All the hype and attention surrounding the high end smart phone market has made several companies turn a blind eye over the potential profits in phones which have nothing more than the ability to make calls. According to popular research firm IHS, phones which sell at a meager $20 and yield a profit margin of 30% are certainly worth producing, at least for Nokia. It is a known fact that Nokia hasn’t been able to replicate the success of its feature phone line in its smart phone line. Its Windows Phone line failed to create the impact the company needed to grab substantial market share.
However, an inch by inch analysis of the Nokia 105, a simple feature phone targeted at developing markets, shows how the Finnish giant still knows ways to generate profits at the lower end of the wireless market. With 35 hours standby time, 12 hours of talk time and a rugged dust and water proof design, the phone doesn’t need data or WiFi capabilities from a marketing stand point. An FM Radio and flashlight are the best features you’ll get on this phone.
The parts needed to build this phone cost $13.50 plus another 70 cents for the assembly. This implies a profit of 30%, according to data provided by IHS. The phone is powered by a chip which goes by the formal name of PMB7900. The chip’s main functionality is to combine baseband and radio frequency transreceivers that primarily work on GSM and GPRS standards. Apart from the PMB7900 chip, there are two other chips embedded in the 105 – a transmit module from Skylarks and a NOR-type flash memory chip from Micron. The total cost of the silicon inside the phone amounts to $5.25, which makes up 39% of the component cost.
IHS compared the Nokia 105 to an older phone, the Nokia 1100, which was designed for this exact market segment. That phone incorporated six chips and required almost three times the same component costs. Wing Lam, an analyst at IHS claims that by integrating all those features into a single chip on the 105, Nokia has been successfully able to reduce the cost of the phone drastically. By keeping the features exactly the same over the last few generations of the world’s most iconic feature phone, Nokia has successively reduced the manufacturing cost of the phone while making no bones about the fact that the features will always remain the same. With developing market like Africa still discovering mobile phones, this segment is set to remain a decent cash cow for the Finnish manufacturer for a few years more still.
