Nokia still turning a profit on $20 model 105 handset

Feature phone carries miniscule hardware cost

Nokia is still turning a profit on its 105 mobile handset despite charging just a $20 retail price on the feature phone.

Research firm IHS said that even with the ultra-low price tag, the company is able to make money with each unit it sells of its entry-level model. The report cites increasingly low hardware prices and a stripped down design in helping to make the ultra low-cost handset remain a money-maker for Nokia.

According to a teardown analysis performed by the company, the hardware for each 105 handset costs the company $13.50 to procure, while manufacturing costs an additional 70 cents. With a total bill of $14.20, the $20 105 handset is able to bring the company a 29 percent profit margin.

Analysts say that the healthy margins come from a combination of lower component costs and a commitment by Nokia to maintain a template for its ultra low-cost handset line. Researchers found that the 105 was in many ways identical to the 1101, a handset that debuted eight years ago and had a manufacturing cost three times higher than the 105.

"By keeping features the same for nearly a decade, the Nokia 105 can integrate nearly all system functions into a single chip, dramatically reducing the cost to produce a cellphone," said IHS principal analyst Wing Lam.

"The 105 allows Nokia to participate in the [ultra low-cost handset] market targeting specific regions and consumers."

Though feature phones have been all but pushed out of the market in North America and Western Europe by smartphones, the platform remains popular in many developing nations where infrastructure is lagging and wireless communications play a vital role in connecting rural settlements. V3 has also found 10 good reasons to stick with a feature phone rather than using an iPhone 5 or Galaxy S4.

Many in the industry have speculated that such markets will help feature phones and legacy technologies such as 3G remain a vital part of the wireless sector even after they have since been discarded in more developed markets.