Nokia Shortchanges China Mobile

Smartphone turnaround candidate Nokia (NOK +1.87%) made headlines late last year when it said it would bring a variant of its new flagship Lumia 920 to the largest carrier in the world, China Mobile (CHL +0.00%). The Lumia 920T is specifically tailored to the wireless carrier's unique 3G TD-SCDMA network, and China Mobile was even going to subsidize the device to effectively free on contract.

Not what the carrier ordered
According to a recent Bloomberg report, Nokia may be inadvertently shortchanging China Mobile. The Lumia 920T is awfully hard to come by right about now, which China Mobile blames on shortages on Nokia's behalf. A spokeswoman for the carrier said that China Mobile had ordered 90,000 units through Jan. 30, and Nokia was only able to deliver a third of those.

That's left most of China Mobile's retail locations out of Lumia 920T inventory as we head into the important Chinese New Year holiday shopping season. Nokia said it sold 4.4 million Lumia units last quarter, comprising two-thirds of its total smartphone unit shipments. The company also conceded that it was facing supply constraints, and was having trouble keeping up with demand. Those are good signs for Nokia's turnaround that's still a work in progress.

There are plenty of fish in the sea
The problem is that, like all commoditized hardware OEMs, there are plenty of substitutes that prospective buyers can turn to, even within the same software platform. Nokia's fate lies squarely on the success or failure of Microsoft (MSFT +0.17%) Windows Phone, for better or for worse. Microsoft is primarily tapping three OEMs for Windows Phone 8 devices: Nokia, HTC, and Samsung.

Since Microsoft exerts a lot of control over its platform, unlike Google's (GOOG +2.81%) Android mess, Windows Phones are inherently more similar than the wide variety of Android variants. The whole reason why OEMs and carriers like to modify Android is in an effort to differentiate their products, and fend off commoditization. In its quest to preserve the user experience it envisions, Microsoft hinders OEMs' ability to differentiate meaningfully.

HTC's Windows Phone 8X looks nearly identical to the Lumia 920T, and would probably suffice for the average Chinese consumer looking for a new Windows Phone. The 8X is available on all three of China's big carriers, including China Mobile. Samsung's ATIV S, which also runs on the same operating system, was recently cleared by Chinese regulators, although it isn't available quite yet. Here's how the 8X and Lumia 920 compare (the 920T just has a different baseband) in some of the pertinent specs.

Sources: HTC and Nokia.

The point is that the differences between these devices in terms of hardware is marginal, at best, and Nokia's supply constraints are an opportunity for HTC to swoop in and win over consumers who are interested in Windows Phone 8. The Taiwanese OEM has fallen on hard times with its Android offerings as Samsung eats its lunch, so it figured it might as well give Windows Phone 8 a try.

The Android rises
If Nokia isn't able to close sales, those buyers are more likely to move on and buy a readily available substitute. One of the consequences of its decision to fully embrace Windows Phone was a major sacrifice in market share in China. Nokia's Symbian platform was once the dominant platform within the Middle Kingdom, and ditching Symbian has hurt its position in China.

In Symbian's place, Android has stepped up to fill the void, and you can see that most of Android's gains in China have come directly at the expense of Symbian. Meanwhile, Windows Phone is still trying to ramp up in China.

Nokia needs to work through these supply constraints posthaste, because otherwise, they're going to be quite painful.