We all knew that Microsoft charges OEMs a considerable amount for licensing Windows Phone. However, what we didn’t know was exactly how much that “considerable amount” is. Now, ZTE has come forth and revealed what it is paying Microsoft, and it’s a fair bit more than most people had anticipated.
At the UK launch of the ZTE Tania, Santiago Sierra, the Portfolio Manager for ZTE UK, revealed that Microsoft gets as much as $23 to $30 per handset sold. ZTE cited the licensing fee as one of the biggest challenges towards introducing affordable Windows Phone devices. It also explains why so many OEMs are queuing up to release Android handsets, in spite of the tough competition. On paper, Android costs nothing, as the core product is offered by Google for free. However, there are several “hidden charges” associated with releasing Android handsets.
Pretty much every Android handset available in the market ships with Google Apps (Android Market, Gmail, Google Maps, YouTube etc.), which are proprietary and require a licensing fee. Moreover, Microsoft indemnifies OEMs who license Windows Phone 7 against intellectual property infringement issues with the product. By comparison, Android manufacturers have to fend for themselves, which often involves expensive litigation and patent licensing costs. Several Android manufacturers including Samsung and LG pay Microsoft in the range of $3-$6 per device as patent licensing fee. Hardware driver development and testing for Android is also reportedly more expensive for Android than Windows Phone which has a standardized chassis.
These numerous hidden charges definitely add up. However, even after considering all extraneous costs, I would be surprised if Android costs anywhere near what Microsoft is charging the OEMs. Nevertheless, it is possible that ZTE is getting a particularly rough deal as it is a rather small manufacturer. Favored partners and bigger brands like Nokia and HTC probably have a more lucrative arrangement with the Redmond giant.