They are seriously betting that the prices of the components they use will go down. Losing that much money just will never be sustainable. And combined with the furiously fast progression of smartphone tech, it makes it even less so. But who knows, I'm not running a phone company so what do I know...
Hmm, selling at lower than Bill of Materials suggests negative gross margin, subtract operating expenses and you have a deeply negative operating margin. With that strategy you need very deep pockets or a parent with very deep pockets.
I'm sure that profit through services can work (Amazon/Kindle?), but they better roll them out and get to scale quickly!
Are they really selling lesser than the actual BOM or the BOM that is published outside? You at least need some profit to run the things. Or are they making money through content? Or they are using mobiles as means of creating brand and selling other products for profit?
I'm confused. If they're pricing their high performance phones for less than the BOM cost, then how are they making money? If this is a loss leader, what is it leading? Low end phones? Some kind of service? Inquiring minds want to know how this business model makes sense.