Are we witnessing the birth of a new branded EMNC?
Woke up this morning to the news that Blackberry had signed a deal with Foxconn to design, manufacture, and market Blackberry handsets in the emerging markets. Importantly, according to the news item, Foxconn will take responsibility for managing the inventory of these new devices, a move Mr Chen, acting CEO of Blackberry, told analysts “means I will never have to discuss inventory writedowns with you again”.
While the news item talked about how this new move on Foxconn’s part was about diversifying their client base to reduce their dependence on Apple, which apparently accounts for 50% of their revenues, it made me think something rather different. It made me wonder whether we are seeing the birth of a new branded EMNC.
Consider these facts for a moment. Foxconn already has significant capabilities as an ODM and OEM contract manufacturer of consumer electronics—it is the world’s largest consumer electronics contract manufacturer. It is the largest exporter in greater China and has facilities in Europe (Czech Republic, Hungary, and Slovaka; it is the second largest exporter in the Czech Republic), North America (Mexico), South America (Brazil), as well as in India and Malaysia. It also has a JV in Japan and has announced plans for new facilities in the USA, earlier this year. It builds a wide range of consumer electronics for the veritable who’s who of this space, being the manufacturers of the Blackberry, iPad, iPhone, iPod, Kindle, PlayStation, and Wii U.
Foxconn Factory in China
Foxconn Factory in Czech Republic
As such, Foxconn already has world class design, manufacturing, quality control, and logistics capabilities. Its scale and scope make it a very low cost manufacturer. Its work with Apple gives it the capability to achieve the enviable fit, feel, and finish of Apple products. As the comment from Blackberry’s Chen above suggests, it has the capability to manage inventory and build to demand. Through its operations, it already has insights in to what consumers around the globe want. The only missing piece of the puzzle, which could catapult it in to the world of branded businesses, is marketing; that is the capability to generate customer insights on its own, respond to it, create customer access to what it makes by building and managing a retail distribution network, and provide post-purchase customer service. This is the knowledge it will now acquire through its 5-year marketing agreement with Blackberry.
News reports have already suggested that Foxconn has started work on developing its own brand of TVs and smartphones, and is investing in the now hot emerging areas like wearables. Thus, the leap forwarded to becoming a branded EMNC is not far. We can expect to see Foxconn’s entry in that space soon. And, given its size and capabilities, it will likely be a formidable player. Beware, all of you in the consumer electronics space!