Theory 1: only 30% of the cost of the N900 is "real" cost
 

Let me explain...If we take an N900 with a hypothetical $500 price and compare the hardware internals of an identically priced laptop, it is clear that the N900 should cost about $150-200.

And no, I don't believe that the 3.5 inch touch screen costs more than a 17 inch non-touch, or a 32GB flash costs more than a 500GB HD, or Maemo with Nokia customizations costs more than Windows 7, or the GSM/HSPA radio costs more than 802.11n. If you follow this line of reasoning you come to the conclusion that the N900 (and the iPhone and the BB and the Droid and all other smart phones) are a total rip-off price-wise.

Any counter arguments?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

lol,

Simple economics. The fair price is what the market will bear.

And, what about fm receiver & transmitter, bluetooth, gps, accelerometers? Add those into your $500 laptop, and the price won't seem so bad.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

It probably only costs .20 cents to manufacture a video game for the PS3 too, but you also have to think about what goes into it before it is being produced ie; design, development, programming etc..

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

There is always a premium to be paid for packing features and processing power into a smaller (and/or mobile) form factor. Same reason that you can buy a desktop that will destroy a laptop for performance dollar-for-dollar. If you haven't figured that out yet, well...dunno what to tell you.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

No FM radio, but there is dual core cpu at 2.2 ghz. no bluetooth but there are 8 usb ports. no gps and accelerometers but 4GB of super fast ram.

Anything else?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

So how much premium is reasonable? 400 percent sounds right?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

whatever the market will bear. Are you really that naive, or just trolling?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Yes, the market will definitely bear Nokia's supressing supply close to Christmas. This is what's been happening. Ask anyone who preordered 2 months ago and still waiting for the actual device (me included).

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

8 usb ports on a laptop?:confused: N900 has one btw

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

It's well-known that most smartphones have a cost production of 100-150$ (Nokia's, iPhone, etc.)
but Theory 2: you produce and sell 100s million of 17" panels and 500GB hard disks so less profit for each one is ok anyway :)

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

btw, if you feel that the N900 (or other smartphone that you mentioned) is unfairly priced, feel free to order the parts from the various suppliers and build your own....or stick with whatever you have now. As far as I know, Nokia is not in the habit of putting guns to people's heads to force them to buy their products ;)

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Sounds logical. So in theory 3, should nokia not want to sell millions and millions of N900s and making up for the profit by lowering the margin on each device and increasing production?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

yes it is well-known that the COMPONENT cost is $100-$150 for many of these devices. That doesn't cover the R&D costs, the assembly costs, the marketing costs, the certification costs, the QA costs, the distribution costs, or profit (these companies are, after all, for-profit entities and are not expected to do things out of the goodness of their hearts). When you add in all the internal expenditures, the actual cost for a low-volume product such as the N900 is considerably higher than the component costs would suggest. It's not until you have a "breakout" product like the iPhone that you can amoritize your internal costs across millions and millions of units and you can either 1) lower the price per unit or 2) enjoy a higher margin per unit. Apple has generally picked choice #2 (as any company with shareholders who have pulses would clamor for) since the demand is high enough to allow them to keep the price where it is (ie the market will bear the current price, so why lower it?).

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

If you look closely, the mobile has features the netbook can never have, like portability, pocketability, and battery life, plus high quality GPS and camera. It depends on what you need. I abhor netbooks, laptops, and desktops, so the N900 is pure freedom for me.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Now this is something, comparing the n900 to a laptop. :)

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

lmao, this is great, pure genius from the op

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Once again:

Smaller does not necessarily equal cheaper.

In fact, at a certain point, miniaturization of electronics assemblies tends to drive cost UP.

For those who do not understand this, I suggest maybe a job or internship in engineering. Should be a real eye-opener.

I really, really wish these naive comparisons would just go away...

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

lol why not?

Seriously btw, 32GB of storage, 256MB RAM (1GB virtual), added 16GB storage, 802.11 b/g, USB (ok no host), 5MP cam, 600 MHz cpu, gpu @ 15Mpoly/s, OpenGL, to list a few, oh sorry I forgot @ 181 grams!! :D

My first laptop had about as much processing power as me, and weighed 5 tonnes lol :D:D:D

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Hi All, thanks for the kind sarcastic words. While I don't seem to understand basic economics and I could take some engineering intern positions I'm rather too old for bruised ego and my masters degree in science doesn't seem to help either, let alone that I run my own consulting business with 3 employees. Sure I could take some good lecture from you.

Anyway, you all seem to be very very very happy with the current price of the N900. Nokia sure loves people like you. Eventually (and hopefully sooner than later ) the price of this piece of hw will come down to earth as Asian manufacturers will definitely make Nokia run for its money.

There is nothing I repeat NOTHING sort of revolutionary hardware-wise in the N900. It is the "package" that makes it worthwile.

And yes, I believe that miniaturization is a cost saving measure and while it may drive prices up INITIALLY, it ultimately helps make things more profitable for the manufacturer.

Also, in North America (I'm not sure how it's done in Europe) nobody I mean nobody buys phones outright. I am one of the few who don't cave in to marketing gimmicks or operator gouging. Because of this trend, people don't see the real cost of phones. If their only option was to buy them with no contract I guarantee that noone would buy the N900 (or the 3GS or the Droid) here in NA.

Peace.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Broad statements like that seem at odds with your professed experience.

Oh, and the N900 engines are manufactured in Asia.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

So a 5MP camera should not cost $200 because it the N900 have a 5MP camera + gps + that cpu/ram + that screen + 32GB memory + all the other things and all those together can not cost $500 if just the camera part cost $200?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

put that in to a pocket-able form factor then we can talk :o

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

The problem with these arguments is they don't take into account R&D, employee salaries, rent, lawyers, all that stuff. An iPod costs like 20$ to make tops, go complain about that on the Apple forums.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

I think the OP should put together an N900 KILLER and sell it at cost to us.

ps: and by 'cost' I meant just the combined price of all the parts in that product ;)

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Production and R&D costs, short term ROI, and market forces dictate device price. When the iPhone costs $699, and most other high end models hover in that same area, Nokia has the ability to match, or in this case, beat the competitors on price.

After the N900 is succeeded by a new model, the profit margin will decrease closer to the cost of the hardware, where Nokia could make $200-300 profit instead of$400, possibly even less. Look at how much the N95 8gb and Motorola Razr cost at launch vs. today.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

So the $500 laptop doesn't have the R&D, employee salaries etc. covered? BTW I never did and will own an Apple product - out of principle.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

The linear slope toward decreasing size just does not always directly correlate to linear reduction in cost, and there's good reasons for it.

Reduction in size while maintaining function (let's say shrinking a notebook to an N900) introduces problems of physics for one. Heat is more difficult to cordon off and shed in a pocketable computer. No fans in the N900 fellas.

And do the math in reverse. Forget products in different market spaces-- look at like products. Do LCD monitors, for example, increase in cost proportionally as they increase in screen size? Nope. There's a bottom that's hard to get below, a flattening of the cost curve as you get closer to the midrange, and then another sharp uptick as you get into the Really Big Realm.

So again-- can we get past these silly comparisons?

Now that's just flat disingenuous.

Master's degree? Consulting firm??

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

I never implied that, they both do.

Computer parts don't cost less even though they're smaller.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

These discussions always seem to end up with this argument from the OP. "Oh, you naive consumers/fanboys/etc who will buy anything at any price..."

The reality just is that we make our decisions: is it worth the price for us or not. If it is, we'll buy it and if it's not, then we won't buy it. Of course I would love to pay less, but only choice I was able to make was either to buy it with current price or not to buy.

You can discuss these issues 'till end of the world but in the end, only way to affect these things is not to buy the product. And it seems that these phones are selling currently well enough with these prices so I doubt that manufacturers are lowering their prices. Markets at work.

And also, as people here have stated, the component costs are just one part of costs for the product. EVERY cost item (including direct and indirect, like general administration etc) a company has has to be covered by the products it sells and then they can add the premium there to get some profits. Only Nokia can know how much the costs would be after assigning all the indirect costs to product but I'd bet it would be completely different number than just the component price.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

That is not the (whole) point. The development costs are shared between many companies, like Intel, AMD etc. Different manufacturers share identical parts like motherboards and chipsets. Intels centrino platform has sold hundreds of millions units.

Also as already mentioned after certain point making something smaller really makes things more difficult. Or what could be the reason we don't have 500$ laptops with 10" screen, 10 hour battery, 2 webcams, GSM radio, GPS, touchscreen and Phenom II processor and on top of that 32Gb of flash memory?

I tell you why, because that would be extremely difficult to do. You can put most of those to the same 10" frame relatively easy, but you end up making some compromises, be it battery life, screen size, gps, gsm, processing power or something else missing - or you have to make it really expensive.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Think about the Design and LABOUR cost. Cost Millions to research on the market, Millions to hire a team to write maemo 5, millions to design the board, millions to marketing the device. Think about those then its a very cheap price..

Think if you try to make one yourself. Can you make it at that cost? I don't think you can make the logic board nor placing the CPU at the most efficient area on the board to make it processing faster. Its look easy but it is quite hard to make unless you test it out with engineer first. :D

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Number One: Nokia don't wanna sell too many N900. In fact I'm sure they feel they are selling too much of them. I'm quite sure nobody smiles in Nokia when they see N900 at the top of the list. Reason? They are not ready yet to make Maemo their main OS. Number two: Pure mathematics. Supose integration of N900 costs 100 Euros. Supose they sell it by 200. Ok. Other expenses (marketing, shop channel, relationship with distributors, trips,...) cost 80 Euros. So they make 20 Euros for every unit sold.

See the mathematics here? Imagine the price of 600 Euros. Margin? 420 per Unit. That is 21 times more.

So they have the same margin selling 10 milion units at the actual price that selling 210 milion at a cheaper price.

And the point here is: They are going to sell it anyway for 200 Euros. Don't worry. They simply are not going to do it now. They'll do it in a year or so, so their return will triple or quadruple.

When they'll have the first milion that buys for 600 they'll move down to 500. Then 400 and so on.

All steps slow enough so you say "ok, I buy it!!" just before another price cut.

Finally, in Nokia favour, you must think they are not the only ones playing this game. Everybody is and mostly their own supliers surely play the same game with them.

I'm sure last generation chips and memory follow the same price phylosophy even for Nokia.

Nokia is surely paying much more for 32GB memory now that what they'll pay next year. And that is simply becouse major players of the market decided not to put too much of them out there, so Sony, Nokia, Apple and whoever wanna have a high end device out there pays them what they want to.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Cost of unit alone does not solely represent hardware cost. This is the most basic of economics, attributed to all markets. Did you see the recent supposed article surrounding the Modern Warfare 2 budget?

$200 million;
- $50 million to create
- $150 million for production / marketing.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

so maemo 5 was free to nokia? what about designing the device?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Just keep in mind that the price of a product is a function of market forces, and that it doesn't depend on costs.

Costs matter when contemplating profitability.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

this discussion leads nowhere i guess, the point is a iphone 3gs costs nearly the same price and nobody says ohh iphone is too expensive they sold millons of devices and a they have contracts with tmobile vodafone etc so the ppls have to pay a lot more over the months with there mobile bills.

Sure 600 euro especially in Europe is a big big price also for me.. i never spend that much money into a "handy";)

I also ask myselfe sometimes why is it in the USA 500$ and here in Europe 600Eur. Thats not fair the devices should have close the same price Nokia is a european firm so taxes should be the same like inner europe for other stuff from france for example.

But iam hopefully that the N900 will fulfill what i await to get and that with a some more development all the bugs will be history. And i will use it over a long time.

best regards Crown

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

I disagree with many of the above posters for the following reasons:

1. Times have changed. It took only two years for a totally new entrant to the smartphone market to shook it up.
Yes, it is Apple, the arch-enemy of every major smartphone maker. It was a bankrupt company and now it could buy Nokia twice over.
It is time for Nokia to take some tricks out of the Apple playbook.

2. Ignoring North America is a HUGE mistake. Nokia cannot possibly leave such a lucrative market out of its strategic planning.
Since we've established that the profit on the N900 is very high, what prevents Nokia from dropping the bomb in NA and selling
the N900 for $250? It would still make profit for sure. Imagine the reaction of people here: wow, gee, look at this awesome cool
device. It only costs $250 without contract. Nokia could sell 1 million N900 in a month.

3. And I disagree with a previous poster's argument that the goal is not to sell many devices, but less at a higher profit margin.
While Appple seems to be doing it successfully - for now it will have to adapt its strategy too. Ultimately as the sector moves
away from the selling-hardware model towards the service-oriented approach (like Ovi or the App store) it is clear that
to gain marketshare in the services one needs to produce an inexpensive platform. Just watch Google. It will come out with its
own phone, then drop its price ridiculously, then eventually it's gonna be for free.

4. While I truly wish for Nokia's global success I don't think that the N900 will be a popular device for the masses. How sad it is.
Maybe the upcoming N9x0? There is simply no time to play catch-up anymore. Com'on Nokia, step ap the ante and use your massive
global talent pool and come out with something truly revolutionary.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

"2. Ignoring North America is a HUGE mistake. Nokia cannot possibly leave such a lucrative market out of its strategic planning.
Since we've established that the profit on the N900 is very high, what prevents Nokia from dropping the bomb in NA and selling
the N900 for $250? It would still make profit for sure. Imagine the reaction of people here: wow, gee, look at this awesome cool
device. It only costs $250 without contract. Nokia could sell 1 million N900 in a month"

I'm sure Nokia is not crazy enough to do this. Who is going to buy other Nokia model if they dump N900 for 250$ without contract?

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

Your knowledge about the global industry is very shallow and US centric. You made some false assumptions and blanket inferences that paint a totally different picture from the truth.

Apple has done nothing unique except in the US, whereby they struck a deal with a carrier to cover and control all advertising production costs, and gave exclusivity and a share in the profits of the appplications in exchange for an unheard of $400 subsidy, which has been the key to its success.

News reports are just reports. Ask the manufacturers, and you'd know the big "arch enemies" in the mobile computing space are Nokia, Samsung, and RIM. These three run the industry with unrivaled scale. Apple is creeping into that fray, but must also deal with WinMo and Android first. I don't think that will be easy, especially with carriers ending iPhone exclusivity deals. Once the subsidy gravy train ends, and the iPhone goes from $199 on contract to $359, other devices with better feature sets will look more attractive, right when the US market is becoming more savvy and mature, and their expectations for devices in that price point increase.

Nokia doesn't need to copy Apple, since most Apple innovations in the phone space were done by Nokia first.
* Nokia had an on device application and service delivery system on its phones long ago. "Download" was ahead of its time, and a precursor to the Ovi Store.
* Nokia almost invented the "desktop view on a mobile", and is still the leader in that space to this day. Most Nokia smartphones and even some featurephones do Flash embedded objects.
* Nokia's 770, the original Maemo device, featured an icon based touch interface years before the iPhone.

So whar exactly did this small 1% of all phones device maker do so special?

"Ignoring"?!? Isn't it the carriers that are to blame? Nokia released the N97 in the US first. Same with the N900. Demand has been obviously high. Why are the carriers not willing to feed tha demand? And why is that Nokia's fault? Nokia has a massive business presence in the US, with research labs as well. But the carriers keep them on the sidelines. The 5800 XM was the best iPhonesque device to come out, and at an unsubsidized price far lower than what at&t pays to subsidized each iPhone. Had they offered half the subsidy offered for the iPhone, it could have had the most advaned smartphone for under $89 subsidized. But Nokia is at fault?

It is actually quite typical, and to be honest, most everyone paid around $450-550, far less than retail. Since the hardware is almost identical to the iPhone, only with a much more expensive camera sensor and optics, it probably cost more to make, so the profit margins may be relatively low...
Common sense and shareholders looking to increase profits keep your idea at the docks. Were the N900 not selling well, you'd have a point, but evidently they can't make enough of thee things. It is just a case of supply and demand with sound business planning.


We agree in this area. Do some research, and you'll see Nokia is already preparing technology to fully subsidize devices with embedded ad delivery systems. Harmattan will be tested with this feature, bringing free devices to the world if it works.

"Catch up"?!? Nokia owns 42% of the phone market to Apple's 1%. Nokia owns 37% of the smartphone market to Apple's 17%. Take off the media tinted glasses and wake up! And a pocketable desktop OS has indeed been done by OQO already, but not a finger controlled full Linux system. And no one has embedded a universal IM/SMS client that I know of. No one has implemented virtual memory (which is ironically something that debuted on the Apple Lisa PC, a famous technical marvel but commercially, an Apple failure) before on a mobile. Nor have they brought an application framework capable of integrating with native toolkits and spanning across 60% (and possibly more) of all smartphones and every desktop OS. Everyone has an app store, but only Ovi can potentially find its way onto any OS. This is what I call revolutionary. Research this market more closely a pay attention, because the real innovators live off results, economies of scale, and long term strategies. Apple has always failed in this regard, and looks o have marginalized itself again. Let' see what response they have when people demand support for Qt and the Qt powered Ovi Store in the next five years, IF they make it that far.

Re: Theory 1: only 30% of the cost of the N900 is "real" cost
 

"Catch up"?!? Nokia owns 42% of the phone market to Apple's 1%. "

This was a typical Nokia fanboyish statement. With that 1% Apple made profits, outpaced everyone else, while Nokia with its 42% lost money and more than 5% market share (mostly to Apple). How would you explain that?