production costs

Bloomberg just ran an interesting story interviewing President of the Windows Phone division Andy Lees, who's been making the press round lately.

The gist of the interview focuses on how it used to cost $400 to produce a Windows Phone back in 2010, but for this next generation of devices, production costs for OEMs are down to about $220. The goal though is to lower that even further to below $200, which will allow Microsoft to essentially flood the market with devices ranging from low-end (where Android dominates) to high-end (where the iPhone and other Android phones take the lead).

Something we haven't heard about though is that there is a tiered licensing based on cost of production for the OEM. The cheaper it is for them to make a phone, the less they have to pay Microsoft. So even though Redmond would be making less per device, the aim is have more devices to make up the difference.

The other real interesting tidbit is the acknowledgment that Qualcomm is the only semiconductor partner Microsoft is working with for Windows Phone:

Microsoft works exclusively with Qualcomm to develop chips that power handsets using its system, allowing it to specify technical details to ensure devices run more smoothly, the executive said.

There is currently no plan to work with other semiconductor makers for Windows Phone 7 devices, he said.

That contradicts earlier information about Nokia working with ST-Ericsson for dual-core CPUs. Indeed, even Qualcomm is on board with Nokia these days. While this doesn't rule out other semiconductors such as Samsung's own Hummingbird, it looks like Qualcomm has a favorable position with Windows Phone for the near future.

Thanks, TheWeeBear, for the heads up!

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