The important part is using it, not specs. My Lumia 900 scrolls faster than my Galaxy Nexus, and I don't even really care why. But, it's still a better experience for scrolling through a list of items, even if the specs on paper are technically less powerful.

I agree with you on that. Although at some point regular people will ask themselves "why should I buy a phone with a crappy display when I can buy an iPhone which also has smooth scrolling and good battery life?

But if Nokia can't have a say in what display resolution or camera to ship, how can they ever hope to produce _anything_ that differentiates them from other WP7 licensees?

Value-added services such as Comes with Music and Free Maps Forever doesn't help here (or at leat it hasn't in the past). It'll be interesting to see how this plays out.

So compete by doing something innovative on the phone hardware. Who was the first to have a self-portrait mirror on the back of the phone? (Palm I think.) Who had the first forward-facing camera on a phone? (Not sure.) Things like that sell a lot of phones to Joe and Jill Sixpack. Put a dedicated flashlight LED and button on the phone. Make it waterproof and/or drop-proof.

But the number one way to sell more Nokia Windows Phones? Get on the other U.S. networks besides AT&T. AT&T is still the king for iPhone but Sprint and Verizon combined sell about as many iPhones as AT&T does, so Windows Phone is missing half the market by only really being on AT&T. (Yes, there are other Windows Phones, but no serious handsets outside of AT&T.)

Also what's the point of high spec if they perform poorly[1].

http://wmpoweruser.com/intel-android-dual-core-so-poor-havin...

Price. I bought a Nokia Lumia 710 just to try it - it was 205 Euro. For that I get a phone that feels fast and runs the now-current version of Windows Phone. In the UK you can buy a Lumia 710 with a prepaid SIM for 99 pounds. At the same price level I get a Samsung Galaxy Mini 2 with Android 2.3 (an operating system from 2010).

tl;dr, Thanks to good software engineering and lower specs, you get a phone that is completely up-to-date software wise at a great price point.

http://www.intomobile.com/2012/06/04/uk-nokia-lumia-710-now-...

Nokias low-cost phones are now being pressured from chinese phone makers. What's to stop that from happening with their WP7 devices?

Probably not well.

Because the entire smartphone industry seems to have been whittled down to a meaningless hardware spec race by ignorant fools. Doesn't have quad core ? Crap phone. No 5 inch screen ? Old hat.

It dosn't matter how good the CPU is at least it reacts but the displays are quite importend.

Really? The biggest-selling smartphones are made by Apple, who famously downplay specs in mobile devices.