Brief: Sony Ericsson retreating from the low end device market
By Stefan Constantinescu on Friday, December 14th, 2007 at 6:20 PM PST In Sony Ericsson
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Could very well be the case.
The tricky part about entry level phones is that there is absolutely no room for quality problems.
If there is a quality issue with a low cost phone, it will result in people calling the manufacturer’s or operator’s helpdesk or even worse, going to a repair center. In the first case the cost is on the order of dollars, in the second case the cost is measured in tens of dollars. Either way, the profit margin on low cost phones is by necessity very low, meaning that a single support call or visit to service center will eliminate (many times over) the entire profit for that phone.
Thus, entry level phones are only of interest to a manufacturer if quality can be kept at a consistent, high level, with smooth forward and reverse supply chains.
And guess what? Nokia has what is generally said to be the best production capability and supply chains in the industry. No wonder they are the leader in the entry level market..
This phenomenon is less critical for mid-range phones, and even less so for high-priced (and high margin) smartphones.