Handset pricing is nothing to do with the cost of production, including royalties. As I have tried to argue for years, people charge what the market will bear and that's a function of competition, not the costs of production.
Of course the cost of production is the LEAST that can be charged, and competitors limit the upside after that. But as proven admirably by Apple charging into the cyberphone market, cost has got little to do with what the market will bear.
When cellphones cost a fortune and didn't do much, not many people bought them. It was the same with home computers. What the market would bear wasn't much, but the costs of production were high, so the market was small.
<Since Nokia is provisioning for contingent liabilities, I seriously doubt that not paying royalties to QOCM since 4/9/07 has affected handset pricing >
Whether they are or are not provisioning for contingent liabilities doesn't have much to do with Nokia's handset prices. What Samsung, LG, Motorola, Sony-Ericsson and others are charging is a lot more relevant, but most important is how well Nokia makes their phones desirable to subscribers.
Apple has done really well. So has Research In Motion.
That's partly why the whole argument about Qualcomm's royalties holding back the market is so silly. As Apple has showed, they don't even need Qualcomm patents to sell for super premium prices with supersonic margins and booming profits. If Apple also uses Qualcomm technology, even in the expensive W-CDMA version, and turns customers loose on cyberspace with a sensible service provider, Katy bar the door.
Whining about Qualcomm royalties is as sensible as whining about the cost of ASICs and screens - they are just part of the cost of making the devices.
Art tends to think along the cost-plus line, as do most people, and unfortunately, Qualcomm management talk along the same lines too, for political expediency more than true belief I hope.
Mqurice |
