Microsoft: Windows Phone production costs will drop by half next year
Windows Phone isn’t doing well. Its market share is in the low single digits, and despite Microsoft having only good things to say about it, the truth is that so far people in the market for a smartphone only look at iOS and Android devices. Or at least those are the aspirational handsets. Some people may end up buying something else, but they seem to have become a minority.
So Microsoft needs to do something for Windows Phone to start growing and eventually turn into a serious contender in the smartphone space. The deal with Nokia is one such thing, which benefits Microsoft a lot. Nokia will sell WP devices simply because of the fact that they have a Nokia logo slapped on them. People who have no idea what Windows Phone is will buy phones because they’re buying a Nokia.
Microsoft also plans to help market the new wave of Nokia and Samsung Windows Phones, at least in the UK, and it’s throwing hard cash at that.
Both of the above things are good. But one of the main problems of WP so far has been that, while high-end Windows Phones generally aren’t as expensive as the flagship Android devices or the newest iPhone, no WP device was ever priced in the lower-midrange, for example. Or cheaper.
That has something to do with Microsoft’s strict hardware requirements, and the truth of the matter is that even abiding by the minimum spec that Microsoft has put out, manufacturers simply couldn’t price their handsets any better.
That’s going to change, though. Microsoft expects some models running Mango to cost just $220 to produce, which is a far cry from the $400 minimum cost to produce the first batch of WP devices which came out last year. In 2012, Microsoft expects Windows Phones to be made for less than $200.
Do note that these are production costs. Sales will occur at higher prices, naturally, although your carrier may subsidize that amount for you and thus give you a phone for “free”.
What the above means is that Microsoft expects WP to finally cover the entire midrange of the smartphone space sometime during next year. That will clearly help the operating system’s market share go up. However, sub-$200 still isn’t “around $100″, which means that the low-end will still be an Android vs. Symbian affair even in 2012, with the former probably taking more and more market share away from the latter. To truly succeed, WP needs to become a mass market platform, and that appears to be possible no sooner than 2013 at this point. Of course, Microsoft has both the patience and the money to wait until then, so by no means does this mean that WP shouldn’t be taken seriously by its competitors, in the long run at least.
If you’re wondering why WP devices will be cheaper to make next year, it’s easy. Since Microsoft has kept the minimum spec the same since last year, it means that the cheapest WP devices will use silicon that’s two years old. And in this world, every chip gets cheaper as time passes and it has been mass produced.
Of course, Microsoft may also decide to have a new spec for lower-end WP devices, something which was rumored many times before. In that case, the dropping of the manufacturing price would be accelerated. What’s certain is that the Redmond-based company currently has no plans to allow non-Qualcomm processors into its Windows Phones.