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Nokia well positioned for approaching smartphone price wars as costs plummet

In tech media, it’s always the big, whizz-bang devices that tend to garner the most attention from enthusiasts. After all, they tend to have a disposable income and they are at the forefront of mobile technology. They're also the loudest for complaints or praise, dominating the conversation.

The Nokia Lumia 1020 is a perfect example, coming in at nearly $700 without a subsidy and $299 with—most people can’t afford it, but it reaps the headlines. And people still want it to have better, more expensive specs. Meanwhile, mid to low range devices are met with derision and scorn as people who are in well financed, established markets chime in on a device not aimed at them. We even see it here on this site, where people just want quad-cores, 1080P displays and envelope-pushing gizmos, yet they lament devices like the Lumia 625.

But the reality of the market is that smartphone prices are dropping favoring devices like the Lumia 52x and Lumia 62x or Huawei with their Ascend W1 and W2. According to the IDC, the average smartphone price has plummeted from $450 to just $375 in the last year. That trend is expected to continue with the average price headed to $350 and lower in 2013 and that directly cuts into the profit margins of Apple and Samsung, who often bet on high-end smartphones like the iPhone 5 or Galaxy S4 (neither of which are cheap).

Michael Morgan, an analyst at ABI research, was quoted by Bloomberg saying

“The days of great growth in the high end of the market are gone…It’s the Chinese companies who know how to survive on tiny margins that are ready for the fight that’s about to ensue.”

In response to this, Apple is expected to release a lower-priced iPhone later this year in addition to their high end version. The problem here though is Apple is reacting to the market instead of anticipating, losing valuable time and ceding ground to other manufacturers. There’s no doubt that companies like Huawei and Lenovo are starting to take a bit out of the smartphone business, but Apple so far has not had a response.

Likewise, HTC has been doing the opposite: trying to be a high-end premium manufacturer akin to Samsung and Apple, chasing the more lucrative “flagship” status with their One. While that device has received very positive press coverage and reviews, consumers are still choosing Samsung over HTC when Android is the option. The problem here, as noted by BGR, is HTC does not have much in response for the low-end market anymore, as they sunk a lot of resources to get behind the One, consolidating their offerings (even the Mini is still not low enough). With Samsung and Nokia positioned against them, HTC is now caught in a dangerous situation.

Nokia and The Next Billion

Speaking of Nokia, the company has been very forthright about reaching “the next billion”, referring to emerging markets who are graduating from simple feature phones to full smartphones. This is why Nokia keeps hammering at devices like the Lumia 520, Lumia 521, Lumia 620 and tomorrow’s Lumia 625—it offers them an area where they can legitimately compete without Apple breathing down their necks.

Just today, AT&T announced the Lumia 520 for a no-contract pre-paid price of $99. That’s $99 for a brand new smartphone, flat in the US. Likewise, MetroPCS was also shown to be getting T-Mobile’s Lumia 521, presumably at a similar price point. While these devices don’t get a lot of admiration, they are the next big thing driving the industry (plus, we actually really like these phones).

The good news here though is Nokia is not reacting to the market, but rather expecting it. That means devices like the Lumia 52x can flourish at the low end for a few months, giving some respite before Apple drops their $300 device in the fall. And if Bloomberg is right, we could see the industry start to cannibalize itself, akin to what happened to the PC market years ago when costs plummeted and there was (and still is) a race towards the bottom.

So, dear reader, next time Nokia or Huawei announce “another” low cost, premium Windows Phone, don’t roll your eyes but rather rejoice at the forward thinking of these companies. Chasing the high-end smartphone market, while necessary to a certain extent, should not and cannot be their only focus. Continue to enjoy the Lumia 920, Lumia 1020 and whatever unicorn phone comes out in the future, but remember, it’s the Lumia 520 and Huawei Ascend W1 that are driving this industry now.

via Bloomberg and BGR

Daniel Rubino
Executive Editor

Daniel Rubino is the Executive Editor of Windows Central, head reviewer, podcast co-host, and analyst. He has been covering Microsoft here since 2007, back when this site was called WMExperts (and later Windows Phone Central). His interests include Windows, Microsoft Surface, laptops, next-gen computing, and arguing with people on the internet.

  • Here here.
  • Round of applause sir !
  • It really makes sense because 50% of people who have mobile phones have smartphones already.. That means that the other 50%, not saying definitely all, most likely don't have them because of finances.. So, the last 50% are the target market, and phones need to be made affordable for them.. Hence lower end devices.. And, this does not only apply to emerging markets.
  • Anxiously awaiting the Nokia 101
  • He meant Lumia 120 :)
  • I'm waiting for the Lumia 020
  • If you're talking about the next generation, third generation, of devices then it would actually be the 30.. LOL.. Like the upcoming L930, L938, L935, L1030, L530, L531, and your super low end NL30... LOL❕
  • no, 40 would be more likely as the previous was 00. So they jumped 20.
    Lumia 900, 800
    Lumia 920, 820,
    Lumia 940, 840
  • I think it is 25: 925, 625 (and the 928 is simply a varient of the 920)
  • I bet you're all wrong and it ends up being the L1.
  • Call 911.
  • That's possible as well.. I feel ya!
  • I hope MS is working on a WP version for Asha models.. Very soon feature phones, as they currently are, aren't going to exist.. I see there being only dumb, and smart, phones in the near future..
  • You mean like the Kin m? ;)
  • No, WFP... Windows Feature Phone❕... Lol!!!... Stripped version of WP, same start screen, same market share.
  • You mean like the good old Nokia days with 6300 etc.
    We are talking about phones then? no Windows needed?
  • Interesting topic. Feature/smartphone is a grey area when it comes to Asha. Analysts such as IDC consider them in the 'smartphone' sales bracket.
  • The majority of people IV seen have the low end android and when they see my 920 they want one so these low end phones are gonna be awsome for people out ther wanting to kick that slow android to the curb lol
  • Good point❕... I haven't seen one person who is satisfied with their low end Android device.. Nokia is going to have the entry level market sowed up❕... Yeah, we shouldn't call WP devices "low end"... They are entry level devices.. I'll try to remember that.
  • Where? Where?
  • You mean "Hear! Hear!"
  • Excellent article Daniel, it needed to be said, especially to some of our WPcentral readers. There is a big market out there for budget users. Im glad the 625 is coming out and think this bodes well for the future.. Nokias product range is broadening out nicely.
  • +820
  • Agreed!
    Nokia + WP is a kill combo.  Uber hardware innovation (even their "low end" cameras are pretty good), great Nokia apps, combined with the efficiency and butter-smooth OS.  The fact that WP can run so smooth and stutter-free even on the Lumia 520/521, is a great thing.  When people pick up a 521 and look at what they are getting for the price, it's pretty amazing.  This is a huge differentiator when you look at the Android offerings at this price point... stuck running an ancient version of Android, and just laggy all over.
    I'm game for any way to grow the WP marketshare.  This could play out to be a great year for the platform.  Haiwai, HTC, Samsung... all are welcome in my book.
  • Do you welcome TAIhiti too?
  • The others may be welcome, but Nokia has 75% of the WP market.
  • High end smartphones are like high end luxury cars (think S class). They are great, have best tech and everybody lusts over them, but automakers don't care about these cars as much as they care about their mid and low end luxury cars (think VW Jetta) because those low end cars are the most important ones since they bring in all the cash.
  • I don't care, I still want an S Class and I will still buy an S Class. This is despite knowing that the Jetta is important to others.
  • Jetta is a good car..... Don't get me wrong... But it's a fine auto
  • I don't think cars are the best example in this case because of so many variables, but still a valid point
  • I think a better analogy is that most people drool over a fillet mignon, but most of those people could only afford to buy a cheaper beef instead. ;)
  • I agree. The high-end models should continue to be there to show-case the full capabilities of the WP OS. But what will provide the engine for WP to move forward and gain marketshare and user-base will be the very capable handsets like the Lumia 520 and 625. What's good about WP is it still performs premium even on low-spec phones.
  • That's the case in countries where you have to buy the phone outright but that comparison falls apart in a subsidy based market like the U.S. where consumers can either a) buy it outright and pay $70/month or b) subsidize it and pay $70/month. It just makes no difference to pick a Lumia 820 over a 920 when going over to AT&T (not sure if they stock the 820 but whatever). That $50 upfront you'll save is nothing compared to what you'll spend over the course of the contract. Good on Nokia to go into the lower end market but beyond the prepaid consumers and those on budget carriers, this won't really make them any better off in North America. It is definitely amazing for Europe/Asia/Africa/Latin America though. That logic works there - budget makes people comprise a little and Nokia has the best compromises available.
  • You forget companies like T-Mobile, metropcs, straight talk, virgin mobile, etc. Not everyone wants to be tied to a contract, and the 15% of contract free phones proves it
  • Along with Clavitox's statement, companies can't even get close to just depending on America either, since the rest of the world is also a huge part of their customer base. Perhaps this: if we want to continue to enjoy high end phones, we have to whole heartedly support Nokia selling budget phones -- especially because their marketshare in America is hurting compared to other places in the world.
  • Although I'm not one to put down lower spec-ed phones in print, I am guilty of thinking that way. Thanks for opening my eyes a bit, Dan.
  • Not a problem. It's a complex industry and a lot of folks aren't privy to it. Glad this helped.
  • The problem is that if other sites stops ignoring the spec war, they still won't recommend WP 8. The OS is missing so many essential apps/games and features that it is hard to recommend it for them.
  • There is no such thing as an essential game.
  • If guess I should have said it's missing all the apps that get 15 minutes of fame. Also, we always get apps once they are no longer popular. Remember how everyone cried about Draw Something? Words with friends? Now everyone plays candy crush. Do we have it?
  • Actually i believe, you need to look at the bigger picture and stop complaining about those apps which are not available in the market and i am saying this because i am using Nokia Lumia 800 since last 8 months and believe me Windows marketplace never let me down because i always find something new and different to try on my phone and pass my time 
    I know games like Subway surfer,TR 2 are great to have but that doesn't really mean you have to crave for them because while using windows phone you need to sacrifice your urge to play popular games for the sake of an overall extraordinary user experience without any kind of lags or bugs etc.
    And don't worry Windows phone is still in its development stage and in six months or so i hope frequency of complaints about lack will be getting lower :)
  • This is 2013. WP shouldn't be in its development stage anymore. For some reason Microsoft thinks Nokia has money to burn like it does. iOS and android were released in 2007/8 so development time came and went.
  • You people took me wrong because by the term developement stage i mean to say is, its now that people have started taking windows phone OS seriously and you have to believe me only when people show interest in an operating system that developers also get intersted so from a developers point of view windows phone OS is still developing and by next six months or so you will find it significantly improved...till then please wait :)
  • The problem is not the missing games, the problem is the lack of simple features of OS such as rotation lock and dedicated volume setting for different functions of the phone When the hell are we going to get that? 2015? The OS is no longer in development stage. It was fine to call the OS as still in development stage when it was WP 7 or 7.5, not WP 8. Lets stop playing the "development stage, maybe in 6 months" card. If we keep on doing that, Microsoft will be even slower. It's time for them to realize that they are digging their own grave with such incredibly slow development of WP8. Lumia 1020 is a clear indication on what the hell is wrong with Microsoft's WP team. Why is is that Nokia can push the envelope and they can't?
  • +1, Additionally there are a lot of missing APIs which are just annoying and which avoid a good app experience, found on other platforms, e.g.:  - Share to app (eg WhatsApp) "contract" (allow apps to register for ShareLinkTask and other content)
    - Video picker API
    - Share video to app (like share picture)
  • I agree about the volume contro. The first time I plugged headphones into the jack of my Lumia 521, I thought I would lose my hearing. I keep the volume set at the highest setting so that I can hear alerts, ringtones...etc. when outdoors or in a public indoor area. I would think that the volume should automatically be reduced to 3 or 4 when phones are plugged in, and return to the prior setting when they are unplugged.Don't miss Rotation locak because I don't rotate the phone that much to begin with.
  • It's funny that since the Lumia 925 and 1020 were announced I have noticed a few more reviews of WP apps on cnet. I'm not sure if this is a coincidence, but the lame stream (tech) media seem to really like (or at least be intrigued by) those two phones. Cnet even had an article listing the top 3rd party alternative apps to "official" WP apps that were missing. It's almost refreshing :)
  • Trust me. They will never recommend it. Never. Why? because those people are assholes. The OS has more features that others can never dream of. Regardless, in time WP will be number 1 OS. those assholes are still assholes.
  • Dude stop living in crazy land. WP will never be number 1. It's like saying Linux will overtake windows. It simply won't happen. Now if Microsoft moves quick and gets their shit together, they might overtake iOS in the US within 5 years.
  • Actually, I would say that WP isn't going to take over Android and time soon, but it is most definitely possible that it could someday.. And, it's also possible that WP could outsell iOS in less than five years... That's kind of the point of the article.. People are going to be surprised by the amount of market share these entry level phones are going to bring to WP in the next few years,, here in America❕... Especially if other OEM's see Nokias success with ELWP's, and they join in with their own EL devices.. Microkia is brewing something up, and like my momma's gumbo it's got to simmer slowly for it to hit the spot❕... Tha G-spot... And, once WP hits that G-spot the markets going to cum all over iDroid... I always have said one thing about iDroid,, once they peak they are going to shrivel up, and fall asleep. And, once they fall asleep big daddy's gonna sneak in and get hizzzzz... Oh-yeah-baby❕
    .... In other words,, iDroid has been just fuc#$%& tha market.. Windowsphone is gonna make love to it.......
  • Best reply for me :D
  • Avoid sites like CNET, ZDNET and the likes, they are simply anti-Microsoft. They have a lot of sponsored articles and they write for the number clicks. I saw the torture-testing for Nokia & d Surface RT and I just switched off from d site completely. If you want balanced reviews always visit WP Central or try PocketNow.
    One thing is sure, Windows Phone is having increased Mind Share and then the market share will follow. Its only a matter of time.
  • You're seriously comparing WP to Linux? WP has Microsoft's huge resources backing it, there is absolutely no reason why they can't push WP to the top eventually.
  • Funny how you're comparing Linux to Windows. Isn't Android a Linux based OS?
  • Android being Linux based has nothing to do with my point. I'm comparing both if their pathetic market share.
  • Just pointing out the irony in your point.
  • Name the "missing essentials."
  • Very insightful article, lol unicorn... Finally you paid out on the trolls who carry on about 1080, quad core etc these ppl are knobs that can't see past a 'Cylinder count', bragging rights over numbers and features are an Android game which btw actually need this as their unoptimised os gets buggier and slower over time. These ppl need to go get an android phone instead of complaining here and parading their Santa wish list
  • Haha you said unicorns
  • I saw that article coming. Hopefully this helps decrease the negative spirits that always seems to follow the low end devices. As a parent I can honestly say that having the 521 and 6 series are great alternatives, cause simply put, I love my daughter to death, but there's no way in hell she's getting a 1020.
  • +925
  • +625
  • It's ok that you are not my dad. No 1020? Arrrgh!
  • You got that right. Child1 got a 710 last year. Later this week Child2 will be getting Daddy's HD7, which he replaced with a 925.
  • Good read
  • Nokia is going for the kill. I'm happy they're doing their best to get Lumia's into people's hands. The best way to do that is with beautiful budget phones.
  • Curious to know what the 625 will go for off contract.  the 620 was $250 i believe, that washow much i bought it for, if the 625 is the same price, it would be killer.  I believe the Nexus was $299, the one made by LG, if nokia can get the price around that or lower for the 625, could be a huge seller. 
  • Actually that's not the Nexus 4's Actual price. That's just in the us. Its much more expensive than that
  • Yes, you're right. It's expensive where I come from. The low price in the U.S. is probably a subsidized price from Google.
  • In my country Nexus 4 16gb priced around usd500 when it was released and usd400 as for now. So with expected price for 625 is around usd300 I think it can do well to compete with Samdung's offering such as grand
  • The advantage of the Lumia 625 over Grand and Win for a market like the U.S. is it comes with LTE. Both Grand and Win don't have LTE.
  • N4 started with 650 then 550 a week later here. Still filled with dust sitting beside the still shinning S3.
  • I think Nokia is doing an amazing job of hitting all price points of the smartphone market. Not the apple approach of just selling their old phone down market when they float a new flagship, but actually designing feature packed brand new devices at every point. I think they are a good company and I hope they get the success they deserve.
  • Me, too, and I hope Apple goes back to niche status where it belongs.
  • I stand by my prediction that one day having an iPhone will be the equivalent of having an email address.
  • Already true.
  • + 4x920 & 2x620
  • Couldn't agree more. Nice post.
  • 1
  • I love my 521, just sayin . . . .
  • Next time, wait until you are
  • Nice... But Samsung, Apple and HTC has a state-of-the-art phone, at least spec-wise, for the phone nerds... Am I asking too much when I say I want a high-end Windows Phone? The way you guys talk sometimes is as WP isn't meant for phone nerds...
  • Phone nerds are a small sliver of the phone market.  You have to get the critical mass if you want your platform to succeed, and that means lower end devices.
  • I agree with that, but I think Nokia is doing well at "hero" phones too. Samsung's GS4 is proof that smartphones have bottomed out as far as innovative new ideas. The only brand new features were gimmicky at best...wave to answer, eye tracking, etc. The other features are just warmed over from the GS3.
    Nokia phones don't win on pure numbers, as WP has never done, as WP is considerably more efficient than Android. However, 92x and 1020 are examples of good high end phones, and I think Nokia is still working in this space as well.
  • Yeah, Apples 'state-of-the-art': 1ghz dual core processor, 1gb ram.
  • Haha, true but I would inch more to make fun of Samsung's "state of the art" Galaxy S 4. Build quality means alot more to me.
  • That CPU performed almost on par with the Exynos in S3, while the GPU is still top notch. The "thickness-to-camera performance" -ratio of iPhone is also the best out there. iPhone doesn't use managed code, so it requires less ram and CPU-power compared to both Android and WP. iPhone is overpriced, but it is a very good phone, with the biggest amount of content, much of it exclusive.
  • Apple? Really? What is state of the art about it? Dual core, slightly over 300ppi, 1gb of ram, no expandable memory, no NFC, no wireless charging, etc
  • Apple's iPhone is state of the art because they say it is. People ooh and ahh over "retna display" because Apple says its awesome... not knowing that its nothing special.
  • It is not that windows phone is not meant for high end specs. As of right now wp8 does not support 1080p or quad cores, which will change when GDR3 is released so ,competing in high end phone market is difficult for OEMs. Nokia is doing its best upping its services and strength such as camera/accessories. Plus general mentality towards high end windows phone is still harsh with general public (partly due to WP being behind on supporting higher specs) but also due to almost saturated high end phone market. So where is the immediate gain to be had?? Market where ppl are switching from feature phone to smartphone (mainly developing country population), where there are not subsidized plans and where ppl have to buy phones in full price. Cheap phones thrive in those situations. Also whole mantra in Nokia's case is to push the handset to masses and make them aware of the platform. Once they are invested in the platform and what to upgrade, they will choose what is familiar. This has been the main issue in US market for windowsphone in general. Apple was out with their iPhone first and ton of ppl bought it, they starting buying apps and it was familiarized as a standard smartphone. Then android came along took the low end market by storm and slowly the high end market. WP is last to the game and it couldn't capture low end or high end market due to obvious reasons. Now Nokia is going head first realizing and seeing the opportunity. So more power to them. Even in my case I will be buying Nokia 520 as a backup even thought I carry 920 as my primary because at that price point why not? 1020 I can wait until GDR3 is out and maybe there will be 1040 with 1080p display + quad core with pureview. For now 920 will suffice. (Honestly we are just waiting on Microsoft to make some headway to level or surpass other platform)
  • The Windows NT kernel, which WP8 uses, has support for up to 64 cores and over 16 EB (exabytes) of RAM if using a true 64bit processor. 1080p screens could be added with a driver, just like Windows. These are not specs that drive a market. The only people who care about such things are those who have absolutely no idea what a CPU core really is, they just know more is better, nor do they understand what PPI even means. Buzzwords drive the current smart phone market, things like retina and octa core (really not 8 cores) processors. They are meaningless. People should buy the phone they want, not the phone the marketing firm tells them they want. I have a L920 because WP8 is the best balance between ease of use and customizability.
  • Well said.... but this type of discussion goes over and over here, almost every topic.... Please come back and control+c control+v your post many times this week....
  • You said buzzwords drive current market. It is opportunity for marketing so no matter how much you say they don't matter, matter of the fact is they do. Yes WP8 is based on Windows NT kernel but WP8 still has no support for some of gimmick features that other OS have (like you say its just a driver to add 1080p so why did MS not add with GDR1 or GDR2 or WP8). So if you are an underdog and want to set some foot in the market you NEED them. Saying its so simple to use does not sell phones. Yes "people should buy the phone they want not the marketing firm tells them" but in reality thats not happening. I love the thought and enthusiasm but what you mentioned right now is only good in theory. I'm all for WP platform but you gotta agree that MS is lagging a tad bit behind. And in my answer to @diego3666 I was telling him there is no harm in asking for higher spec, but the article Daniel wrote is about how Nokia is trying to infiltrate and exploit the market that has been under estimated and mostly uncovered. If you read it again you might get my point. (On the side note I read somewhere even though NT kernel supports multiple core WP8 right now cannot handle more than 2 cores, not sure how much of that is true. I know cores don't matter but I will redirect you to your mention of buzzword.)
  • It's not even a driver to support higher resolutions. On Windows, it's simply a matter of telling the driver what resolution to use. The issue is that higher resolution requires a larger frame buffer - more RAM - to describe all those pixels. It needs larger Z (aka depth) and stencil buffers for 3D rendering. That RAM is usually integrated into the main system chip, so your choice of screen resolution is limited by how much video RAM there is. Apps are likely to need more system RAM to support higher-resolution bitmaps and textures as well, possibly more detailed models if they use 3D. There's a reason Windows Phone uses very simple screen objects, they don't need much RAM to describe them.
    In addition to the screen likely requiring more power, more RAM also requires more power. RAM needs to be constantly powered, and constantly refreshed, otherwise the data in it is lost. Each bit in RAM is a tiny capacitor, a device that holds an electrical charge. That charge discharges itself within quite a short period of time, so it has to be regularly read and written back so that when it is read, there's enough charge left to be detected. (Reading the bit also causes the capacitor to discharge, so the reading circuit automatically recharges it.) More RAM basically means lower battery life, or a larger battery is required.
    Windows Server 2012 (same kernel as Windows Phone 8) supports 640 logical processors (64 processor sockets) in the higher editions. The lower editions are restricted by configuration in the registry: they run exactly the same code. Windows 7/Server 2008 R2 blew away the old one-logical-core-per-bit limit (32-bit OS supported 32 processors, 64-bit supported 64 processors in Windows Vista/Server 2008 and earlier editions). I think the theoretical limit is 4096 (64 processors in each of 64 groups), but Microsoft only claim to support configurations they can test, i.e. hardware that actually existed when they were developing the OS.
    The CoreCLR on Windows Phone 8 is a filtered version of .NET Framework 4.5. Basically, the complex pieces used for implementing the 'server' garbage collector, ASP.NET and other server-side pieces, and the complex Code Access Security model are removed. .NET 4.5 supports more than 64 processors, though you have to turn support for processor groups on in the program's configuration file (they are off by default) to have its threads run on more than one processor group.
    There isn't a lot of benefit in having additional cores in Windows Phone, because the OS behaves the same way as Windows 8 'Windows Store' apps. When an app moves into the background, the OS asks it to persist any unsaved state - so that its memory can be discarded - and then suspends all its threads. The code of non-foreground apps literally cannot run. An app has to register a background agent to keep itself up to date in the background, and the OS is very stingy on giving these agents resources. Foreground apps are actually very unlikely to be able to consistently saturate two cores and get any benefit from more than two cores.
    In contrast, Android just allows all code to run all the time. That's why it needs more processor cores: because background apps and services can be hogging the CPU cores and preventing the foreground app getting work done. It requires the user to actively manage the running apps and services to avoid runaway CPU usage, which uses up the battery, while Windows Phone (and iOS) follow the motto: "out of sight, out of mind".
    Additional CPU cores will still use a little power even when 'parked'. Less than they would if they were idle, or actually being used, but again, it's a trade-off of performance versus battery life.
  • Even without 1080p the 920 and 925 still have 334 ppi. I mean come on, 720p I think would look extremely sharp already on a sub-5" screen. Heck, 720p looks sharp on a 24" screen.
  • What's surprising to me is that I actually miss my 720 a bit after going to the 925. It just offers tremendous value in a different sort of way. It's little wonder that the 620 and 520 are selling well. There's consumer satisfaction in paying a small price for big capabilities, even in developed countries. Glad you wrote this. Remember that volume is a major driving factor in building out the ecosystem. In hindsight, the 520 may do more for WP than any other model.