Materials of Nokia's new flagship model smartphone, the Lumia 900, cost $209, some 46 percent of its retail price, with the Finnish firm saving on processor and memory cost, teardown analysis of research firm IHS iSuppli showed on Wednesday.

The Lumia 900 represents a make-or-break effort by Nokia and Microsoft to re-establish their foothold in the smartphone business, the researcher said.

While Nokia is willing to accept hardware lower margins to carve out smartphone market share, Microsoft also is pitching in on the operating system software side, it said.

In addition to Qualcomm chipset, the Lumia 900 uses Samsung's $58 display, memory from Micron and Elpida, and smaller components from Broadcom and STMicroelectronics, the researcher said.

IHS iSuppli said materials of SII Skyrocket, similar model from Nokia's key rival Samsung, cost $236 as the Korean firms has to use more expensive processor and more memory to reach similar performance.

Earlier on Wednesday, Nokia said it had found a software bug in the model, on sale so far only in the United States, and is effectively giving the model away until it is fixed, blunting its bid to turn around its fortunes.

Though still the world's biggest volume maker of cellphones, Nokia lost the top spot in the lucrative smartphone market last year and it warned on Wednesday of losses at its phone business continuing into current quarter.

(Reporting By Tarmo Virki; editing by Gunna Dickson)

Smartphone