Research firm IHS said that “by sticking to a limited set of features and employing a highly integrated design”, Nokia has been able to achieve a “modest” profit on its 105 handset, which retails at just $20.

With the device offering a new low price point for “ultra low-cost handsets”, IHS said that Nokia is still able to turn a profit, based on its assessment of bill of materials and assembly.  However, this does not take into account “additional expenses such as software, licensing, royalties or other expenditures” which will further eat into its margin.

According to IHS, the bill of materials for the 105 is $13.50, rising to $14.20 when manufacturing cost is factored in. The biggest costs for the device are “baseband/RF/memory” components, which make up $5.25 of the total.

Wing Lam, principal analyst for IHS, said: “About eight years ago, the IHS Teardown Analysis Team dissected the iconic Nokia 1110 cellphone, a hugely popular device that defined the ULCH segment and had very similar features as the new 105. We determined that the 1110’s BOM was nearly three times larger than the 105’s – even when accounting for the black-and-white display used on the old model.”

“Therein lies the 105’s secret: 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,” the analyst continued.

Interestingly, this is the “polar opposite” of the strategy used in the smartphone market, where features are added each year but the BOM costs and pricing remain the same – meaning customers pay a similar amount for a more advanced handset.

According to IHS, the 105 targets emerging markets in Africa, India and Latin America, and offers long talk and standby times – “valuable in regions with poor power grids or frequent shortages of electricity”.