Inside Nokia's Struggle Against Apple's iPhone - Wall Street Journal

By Anton TroianovskiAnd Don Clark

Nokia Corp.'s new top-of-the-line smartphone sells for $200 less than Apple Inc.'s cheapest iPhone 4S. But under the hood, Nokia actually pays more for the phone's components, according to an analysisâ€"underscoring the challenges for the Finnish cellphone maker as it struggles to compete in the cutthroat mobile marketplace.

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.

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. Nokia declined to comment on IHS's analysis. Apple didn't respond to a request for comment.

In part, the cost difference is accounted for by the Lumia's larger screen and more advanced wireless chipsâ€"the Nokia phone can run on fourth-generation LTE networks, while the iPhone can't. But the cost differences also reflect Apple's command of the electronics supply chain and its ability to extract lower prices from suppliers.

For Nokia, low margins could be a big problem. To regain ground lost in the smartphone wars with Apple and manufacturers of devices running Google Inc.'s Android software, Nokia is betting on a new line of devices running Microsoft Corp. Windows software. Part of the strategy, Nokia Chief Executive Stephen Elop has said, will be to lower sales prices. With high component costs, that will be a tough business proposition.