Nokia’s profit margin struggle against Apple

May 31, 2012
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A new infographic has been put together by iSuppli that delves into the numbers behind Nokia and Apple's profit margins in mobile. It really shows why it's so difficult for Nokia or almost any competitor to put a dent in Apple's dominance. The chart compares the cost to produce the Lumia 900 versus the iPhone 4S, revealing that Apple not only gets to charge way more for its device but also pays less for its components.

According to iSuppli's data, the cost of components for Nokia's Lumia 900 is about $209, while its off-contract retail price is $450. Meanwhile, the comparable 16GB iPhone 4S retails off-contract for $649 but only costs Apple $190 in components. Apple makes almost twice as much as Nokia per phone sale, excluding the costs from manufacturing, marketing, and distribution.

Although the cost difference is partly due to the Lumia's use of a larger screen and LTE-capable wireless chip, the disparity is also a result of Apple's command of the supply chain. Apple orders components in much larger quantities and is able to negotiate for lower prices.

This makes it difficult for any Apple competitor to catch up, considering that any smartphone going against the iPhone would have to be advertised with a lower price, while the smaller volume would presumably mean a higher cost in components.

[via WSJ]


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