Nokia Lumia 900, Priced at $99, Costs $217 to Manufacture

The Nokia Lumia 900 mimics Apple's holistic design approach, says IHS iSuppli. While AT&T sells it for $99 with contract, it costs Nokia $217 to make.

AT&T subscribers can purchase the LTE-savvy Nokia Lumia 900 for $99 with a new two-year contract, though the device costs Nokia $217 a pop to make, IHS iSuppli reported April 11, following a physical teardown of the smartphone. Sans manufacturing, the bill of materials totaled $209.

Without a contract, the Long-Term Evolution (LTE) smartphone sells for $450€”a good $100 lower than comparable devices such as the Samsung Galaxy S II Skyrocket, said the report, pointing to a critical Nokia tactic: passing the savings to the consumer to help the company grow market share.

A savvy Nokia, mimicking Apple€™s holistic approach, closely cooperated with its OS provider, Microsoft, and chip maker partner Qualcomm, iSuppli found.

€œOne of Apple€™s advantages over Android has been the company€™s complete control of both the hardware and operating system software, helping it to produce efficient and economical iPhone designs,€ Andrew Rassweiler, a senior principal analyst with IHS, said in a statement.

€œFor the Lumia 900, Nokia and Microsoft worked in close partnership with Qualcomm to develop and optimize the software stack in order to take full advantage of the hardware. But while Apple capitalizes on its low hardware costs to attain industry-leading margins,€ Rassweiler added, €œNokia is using this approach to offer an inexpensive phone intended to [attract users] on the basis of price.€

The priciest item on the Lumia 900€™s teardown list is its display and touch-screen, at a cost of $58€”though the Samsung S II Skyrocket€™s display and screen cost $64. At $27, the Lumia 900€™s NAND flash and dynamic RAM (DRAM) were also less expensive than the Skyrocket€™s, at $32.

€œThe Lumia 900€™s design allows it to operate with only 512MB of DRAM, half the 1GB used in the Samsung Skyrocket and most other comparable smartphones,€ said iSuppli. Because of this, the Lumia 900€™s total memory cost is $5 less than the Skyrocket€™s.

Ditto goes for the processor.

While most new smartphones go for dual-core processors, or even boast quad cores, the Lumia 900, €œbecause of its efficient hardware/software design€ is able to use a single-core Qualcomm processor, says iSuppli, to similar results but at a cost that€™s $5 below the Skyrocket€™s.

The Lumia 900 runs a processor that€™s the minimal requirement for Windows Phone 7.5, said IHS iSuppli analyst Wayne Lam. €œThis expands the addressable market for Windows Phone 7.5 devices, allowing Nokia and Microsoft to compete in the low-cost smartphone market now dominated by Android.€

Qualcomm€™s central role in the Lumia 900€™s design made it a big winner on the bill-of-materials [BOM] front, as it supplied not just the applications processor but the baseband processor, power management IC and radio-frequency transceiver.

Samsung was another big player, with its display and touch-screen accounting for 28 percent of the BOM total.

The single line-item that was higher for the Lumia 900 than the Samsung Galaxy S II Skyrocket is what iSuppli refers to as the €œwireless section€ and which adds $38 to the Lumia€™s price tag but $37 to the Skyrocket€™s.

With the Lumia 900€™s $99 price point, it makes sense that Nokia and Microsoft are shooting for first-time smartphone owners€”users who may otherwise be checking out those low-end Android handsets. Given the quality of their make-it-or-break-it effort, however, along with the fact that in an ailing economy it€™ll be tough to get feature phone owners to sign up for data plans, Forrester analyst Sarah Rotman Epps has pointed out, the pair may be better served to instead launch their most aggressive recruiting efforts toward Symbian holdouts, she said, and Research In Motion BlackBerry users.

Full disclosure, Rotman Epps added in her April 5 blog post: €œI love my Windows Phone.€