Possible Move to Consolidate Manufacturing at RIM

By Nida

Research In Motion (RIM) has been partnered with Celestica for several years now. This Canadian company has been one of the manufacturers for RIM. However, at first Celestica was not actually manufacturing hardware. Rather, they would package everything together and install the specific operative system for each product, and then handle shipping to different cities in the United States.

As RIM’s products started to get more popular, Celestica started to handle more manufacturing for RIM, to the point where Celestica depended on RIM for a large portion of its quarterly revenue. Celestica has announced that it will be decreasing BlackBerry manufacturing in the months ahead, which has been interpreted by most as a move by RIM to consolidate its manufacturing. This is probably a good thing, considering that RIM has long had a bit of a problem with device variation.

RIM & Device Variation

When they first started, RIM produced just two forms in the PDA and pager styles. They initially had only four models – that is, one of each model for two networks: Mobitex and DataTAC and Mobitex. Then, in the next few years, RIM’s rapid expansion in the smartphone market meant many new carriers and target audiences. If you can think of a form factor, RIM produced a BlackBerry in it, from flip phones to sliders to all-touch models. Not only that, in each of these they had multiple price tiers and versions and they also produced different versions for CDMA and GSM.

Device variation in RIM was huge. Basically, if a carrier customer would purchase it, RIM would create it. Because of that, it’s probably a good move that RIM is consolidating its core apps for the  BlackBerry 10 and, perhaps they will also move to consolidate their products and offer only a few, high-quality models. If this is what they’re doing, then the Celestica wind-down in manufacturing certainly make sense, since fewer products means that RIM will also require fewer contract manufacturing partners. This is not to say that RIM will be producing fewer products, but that device variation will probably go down.

Is This a Positive Move For RIM?

At some point, RIM had at least four contract manufacturing partners, including companies like Celestica, Wistron, Jabil, Elcoteq, and Flextronics. In recent months, we’ve not only seen RIM overhaul their core apps, they have also made significant changes to their board of directors and management team. RIM is changing and Celestica’s announcement seems to indicate that manufacturing consolidation is one of the moves that RIM is taking. With RIM’s run of negative news in recent months, it is heartening to see the company making important changes to become more streamlined and effective.