BlackBerry teams up with Foxconn for budget smartphones as sales continue to plunge
Blackberry's new interim chief John Chen has got a rude awakening to his new job: it sold only 1.9 million smartphones in Q1 compared to 3.7 million last quarter and lost $4.4 billion.
Context & Ripple Effects
The Foxconn deal lands three months after BlackBerry announced 4,500 layoffs and a $950M quarterly loss alongside a declared pivot to enterprise services, making this John Chen's first structural move as interim CEO — announced the same day the company disclosed just 1.9 million smartphones sold versus 3.7 million the prior quarter and a $4.4 billion loss. Per TechCrunch's pickup of the story, the first joint device will be a 3G BB10 handset arriving around March or April 2014, pointing the budget push at lower-cost markets rather than flagship competition.
The story traveled unusually widely for a year-end earnings item — Globe and Mail, BBC, AllThingsD, BGR and others all carried it — reflecting how directly the manufacturing tie-up answers the question of whether BlackBerry stays a phone maker at all.
First-order effects
- Foxconn absorbs design and manufacturing burden for the entry-level line, cutting BlackBerry's capital exposure on handsets whose volumes just halved quarter over quarter.
- John Chen's turnaround plan now rests on two legs at once: the enterprise-services focus set out in the September restructuring and a low-end hardware bet aimed at March/April 2014.
Second-order effects
- Foxconn adds a recognizable Western brand to its assembly portfolio at the budget tier, deepening its shift from pure contract manufacturer toward partner with product-line influence.
- Carriers and distributors get a cheaper BlackBerry SKU to stock in price-sensitive markets, where the company must rebuild unit volume without cannibalizing whatever margin remains on BB10 devices.
Third-order effects
- If the model holds, BlackBerry becomes a brand-and-software licensor riding someone else's factories — the structure struggling handset OEMs converge on as owned manufacturing stops paying for itself.
- A failed budget relaunch would leave the September enterprise pivot as the entire company thesis, accelerating the industry-wide split between hardware brands and their contract-manufacturing base.
The trend: Volume-collapsing handset makers are outsourcing design and production to contract manufacturers like Foxconn while retreating toward software and services revenue.