The ultra-luxe cellphone

A dozen craftsmen sit in neat rows, hushed, squinting, judiciously turning minuscule titanium screws. They are assembling smartphones. After fitting all 184 parts, they buff the edges of the device, then laser-engrave their name onto a titanium plate where the SIM card goes, snapping it into place.

Vertu, which has been producing premium gadgets for over a decade, began selling the Ti, an Android-based phone with a base price of $9,600, earlier this spring. Lately, the company’s Church Crookham, Hampshire, England manufacturing center has been hosting customers to show off this scene: a single craftsman carefully constructing a single phone. The story behind a pricey phone can be very valuable, too.

After decades of growth, the tastes of the ultra-wealthy have begun to shift away from consuming merely for the sake of it. According to the results of a survey released last December by McKinsey & Company, 51% of Chinese luxury buyers now believe showing off high-end purchases is in bad taste, up from 37% in 2010 — and in line with the opinions of shoppers in developed countries like Japan. To be successful, a luxury “brand needs to continue building on its heritage — highlighting the skill of its craftsmen,” the report concluded.

Massimiliano Pogliani, Vertu’s global chief marketing officer, says that his customers “are becoming much more interested in the story of where these products come from.”

Vertu began in 1998 as the brainchild of Frank Nuovo, then Nokia’s design chief. The Finnish giant would carve out a niche of posh phones to cater to the desires of super high-net-worth individuals. Devices finished with fine calf leather, alligator skin, or diamonds sold for upwards of $300,000 apiece. Fueled by surging demand in China, Russia, and the Persian Gulf, the brand grew, selling more than 320,000 phones in the last first decade.

Vertu expanded to some 1,000 employees and generated $342 million in sales in 2011, the last year for which data is available. Late last year, as Nokia faltered, it sold 90% of the company to Swedish Private Equity firm EQT Partners for a reported $200 million.

One of the chief benefits of the sale was moving away from Nokia’s aging Symbian OS, which was holding Vertu back. Its latest model, the Ti, runs the Android operating system — and all the apps that are available — but looks unlike any other Google-powered device and more like something Bond might have left behind. The processor and memory on the Ti put its computing power roughly on par with Samsung’s wildly popular Galaxy S3. But it also features an 80-carat sapphire display — which the company says is four times stronger than ordinary cell phone screens — and a titanium shell. Plus, built-in ringtones were performed by the London Philharmonic. And Vertu’s killer app: a concierge service. Apple has Siri; but the Ti has a real person who will book hotels and recommend restaurants. The service is free for a year but costs up to $6,125 annually thereafter.

Ramon Llamas, an IDC research manager, says that even capturing 1% of the $295 billion global smartphone business would be an achievement for the firm. Vertu CEO Perry Oosting, a former goldsmith who previously worked at Bulgari, Gucci, and Prada, argues the company managed to grow even when it didn’t have a new model. There are other luxury phone makers, but most are cobranded affairs, such as Blackberry’s Porsche device or Acer’s Ferrari-phone. Of all these, Llamas adds, “At the end of the day it is just a phone.” Perhaps that is why Vertu is trying to tell a much different story.

A shorter version of this story appeared in the April 29, 2103 issue of Fortune.

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