Market Insight

BlackBerry has a chance of new success, with veteran smartphone brand licensee TCL

February 25, 2017

Ian Fogg Ian Fogg Senior Director, Mobile & Telecoms
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Key points

  • Chinese company TCL launches the first handset using its brand license from BlackBerry.
  • BlackBerry KEYone features SnapDragon 625, Cat 6 LTE, a physical keyboard with trackpad mode like the BlackBerry Passport, and a 4.5” full HD display.
  • Global availability from April 2017.
  • Flagship positioning and price, Euro599, USD549. A significant price for a 625-class smartphone.
  • Bundled BlackBerry Dtek security application and Hub software.

 

Our analysis

The new BlackBerry portfolio has a chance of success, because few companies now offer BlackBerry-style design and features, and the productivity-focused smartphone segment is underserved. But TCL must be careful not to price itself out of its target segment.

Microsoft's failure to establish Windows 10 Mobile as the enterprise smartphone OS provides a second chance for BlackBerry to re-establish its mobile market presence. Samsung Knox is widely known, but has had recent security failings, and Knox is often lost in the marketing noise as one part of Samsung's vast portfolio of phones and software features.

And, even if BlackBerry's smartphone share remains so low it is hard to quantify, the vast scale of the smartphone market -- over 1.5 billion units will ship in 2017 -- means even a tiny share would represent significant unit volumes and revenues compared with almost any other device market. 

The BlackBerry brand means different things to different  countries and segments, it is not as simple a brand to operate as it may appear at first glance. For new brand licensee, TCL, it must decide where to focus its BlackBerry-brand portfolio because the brand must be at the heart of how the range differentiates.

Selling significant volumes of smartphones will be a challenge for TCL, because while BlackBerry has had a continuous presence in the mobile market -- unlike other licensed smartphone brands such as Nokia -- much of BlackBerry's sales unit volumes in recent years have addressed other audiences. For example, selling to data-centric and value-centric emerging market consumers in South Africa, Indonesia or south/central Americas, or before to the BlackBerry Messenger-obsessed European and middle eastern youth.

At its peak, BlackBerry shipped 53m smartphones in 2011 but shipments dropped rapidly to 3.90m just four years later in 2015 because of the delayed disruption impact of Apple’s iPhone and especially of Google’s Android OS.

IHS recommends TCL should focus initially on the productivity-focused business and prosumer audiences which were the BlackBerry's earliest adopters in the late 1990s and early 2000s, and not other traditionally BlackBerry owners because:

  • A productivity focus play will generate significantly higher margin than the other segments.
  • Microsoft has failed to establish Windows 10 Mobile in this space, and no other company is dominant in the segment, yet.
  • The old youth-focused BlackBerry Messenger audience overlaps too much with the appeal of TCL's other brand, Alcatel. Plus, those consumers are now older, and have different needs.
  • A data-centric emerging market focus would be significantly lower margin.
  • TCL does not have the rights to the BlackBerry name in the emerging market that has been strongest for the BlackBerry brand in recent years, Indonesia.

To appeal to a productivity segment, TCL must:

  • Revive and re-launch the brand. The productivity-centric audience now mostly uses Android or iOS, TCL must re-establish the appeal of the BlackBerry brand.
  • Create a distinctive and recognizable design. Ideally, this should leverage iconic BlackBerry strength such as text entry, speedy messaging communications, and time saving intelligent short-cuts.
  • Use AI and machine learning to make BlackBerry even smarter. The classic  BlackBerry OS learnt from each user's individual behaviour to speed filing emails to the most appropriate folder. Now TCL should use machine learning to take this to the next level, while ensuring user and enterprise privacy.
  • Communicate BlackBerry security benefits. Most Android smartphones do not routinely gain quick access to Google's monthly security updates, yet enterprises and individuals have accepted this poor situation. TCL must not just deliver security, but convince buyers it is a differentiator worth buying a BlackBerry for, even if the BlackBerry does not match the latest Samsung or Huawei design in other regards. This is a key area the BlackBerry business has struggled in recent years.
  • Ensure distribution. Enterprises routinely buy via operator deals. TCL must ensure its new BlackBerry portfolio is widely ranged by carriers, as well as being available on the open market. And, if delivered via the carrier channel, it must ensure software updates continue to go out swiftly with identical timing to SIM-free purchased handsets.

However, TCL has a number of advantages it can exploit compared with the old BlackBerry (formerly called RIM):

  • TCL has experience licensing brands and maximizing return. It has successfully used the Alcatel brand to establish an international smartphone business with the majority of its shipment volumes  going to outside of China. This is rare among Chinese OEMs, who normally mainly sell to their domestic market.
  • Scale. TCL can cross leverage design and engineering teams from its various brands. This will enable TCL to be profitable at lower volumes of BlackBerry smartphone sales than a company which solely makes BlackBerry smartphones. TCL shipped 62m mobile handsets in 2016, of which 34m were smartphones.
  • Innovation and ability to think laterally. TCL's Alcatel range routinely offers distinctive design features which match or better smartphones costing considerably more. In 2015, it offered a reversible dual stereo, dual mic, design on the Idol 3. In 2016, it bundled a plastic VR headset as part of the packaging of its flagship model.

TCL needs to execute effectively on its brand and operational advantages if it is to turnaround the fortunes of BlackBerry as a hardware brand. What it must avoid, is simply pursuing the same strategy of recent years, because that will see BlackBerry continue to decline.

Geography
Canada China USA
Organization
Blackberry RIM TCL TCL Alcatel
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