Why Nokia Can’t Even Begin To Compete With The iPhone 4S

Why Nokia Can’t Even Begin To Compete With The iPhone 4S

In a recent article over at The Wall Street Journal, Nokia’s challenges trying to make a dent in the iPhone 4S with the Lumia 900 are highlighted by some pretty grim numbers: Nokia makes more than $200 less on each Nokia Lumia 900 sold compared to Apple’s profit on an iPhone 4S.

Part of the problem is that Nokia is forced to sell the Lumia 900 for about $200 less than the iPhone 4S to even compete in the iPhone-driven US smartphone market, but Apple’s mastery over the global supply chain also rears its ugly head: Nokia has to pay more for all of its components than Apple does.

The components of the Nokia Lumia 900, which sells for $450 without a phone contract, uses $209 worth of parts, according to research firm IHS iSuppli. Meanwhile, the comparable 16-gigabyte iPhone 4S, sold for $649 without a phone contract, is made of components that cost $190, iSuppli says.

Nokia’s top-of-the-range Lumia 900 costs $200 less than the cheapest iPhone 4S. But Nokia pays more for the parts. Ben Rooney in London explains how big a problem this is for Nokia.

The findings indicate Apple makes nearly twice as much on iPhone sales as Nokia does on the Lumia 900, excluding costs like manufacturing, marketing and distribution.

It really shows how difficult it is to even put a dent in Apple’s dominance. The only way to really sell non-iPhone smartphones is to undercut the iPhone in price, but because Apple orders in such bulk they get a huge discount on components, that ends up leading to significantly smaller profit margins. It’s a shame, because the Lumia 900 is actually an excellent phone, and the iPhone can only become a stronger device if faced with serious competition. Cupertino’s got such a stranglehold on the industry, though, that there’s literally no way to even compete.

Related
  • zviivz

    Does Nokia have to pay Microsoft for using Windows OS?

  • McCharley Okafor

    Johnny you really blew it this time. Is this post really about the Lumia 900 and iPhone or more about Apple and Nokia market dominance. In that context I’l say first products don’t always do well. I love Apple products a great deal but that doesn’t mean we own the space. Any competitor can out do us if don’t keep working on our products. You said it yourself, the Lumia 900 Nokia/Windows phone is an excellent device. Form your previous posts, like Apple which is an innovation driven company, constantly revising, creating and trying out new things till they find what works, if Noika adopts same strategy, its just a matter of time before they tweak their supply chain in their favor.


    Just saying; the real competition is in the experience space and these guys seem to working hard at not coping the iPhone. They are trying to create a new experience. Their own experience..
  • Steffen Jobbs

    Economies of scale is what it’s all about.  It’s hard to beat.  It’s amazing that second-tier Android vendors can even survive selling only a few million smartphones a year.  Those short production runs must be real margin killers.  What’s even more amazing is that Apple is still able to sell their older 3GS and iPhone 4 that likely paid for themselves the first year they were introduced and are now nearly all profit.

  • Steffen Jobbs

    @zviivz
    It would seem as though Microsoft is really paying Nokia to use Windows Phone OS since MS is pouring money into Nokia just to keep it afloat.  I believe the partnership a trade-off of free licensing for an established customer base.  It’s hard to say whether it will pay off in the long run for either company.

About the author

John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

(sorry, you need Javascript to see this e-mail address)| Read more posts by .

Posted in News | Tagged: , , |