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It's why phones and other tech is built usually in one run - with a batch size aimed to meet the likely total sales - to minimise production and set-up costs.
Pretty much only Apple has lines running permanently from what I've read.Avenzuno likes this.10-08-16 04:45 PMLike 1 - It's generic parts from a generic supplier, as a person who worked for a generic supplier I don't think it would cost them too much to place several small batch orders compared to the risk of loss on one large unsold batch.
TCL has the tooling already in place and the supply of components readily available. If the first batch sold well and demand was there, they could order new runs.
To do it any other way would be stupid.
Posted via CB10Avenzuno likes this.10-08-16 04:56 PMLike 1 - It's generic parts from a generic supplier, as a person who worked for a generic supplier I don't think it would cost them too much to place several small batch orders compared to the risk of loss on one large unsold batch.
TCL has the tooling already in place and the supply of components readily available. If the first batch sold well and demand was there, they could order new runs.
To do it any other way would be stupid.
Posted via CB10
There's a lot of stupid producers out there then...10-08-16 05:08 PMLike 0 - No, they just hire regular slots in the calendar for production of their product. Once tools are built for particular products they are easily switched around to build various things, one day you make a batch of this, the next day you make a batch of those, that's how contract manufacturing works, the hard work and real cost is in development. At least in my experience as a developer of products at a contract manufacturer.
Posted via CB1010-08-16 05:15 PMLike 0 -
John Chen says BB won't be in this game after the D60 and the Mercury (if it comes out). So, in this last 6 months of internally produced phones, how many small runs do you think could be scheduled?10-08-16 05:26 PMLike 0 - I believe that's the wording Chen used in the ER. Up until now BB have paid (from their internal resources) for phones to be built, in the licensing model to come, they won't pay a penny of the design, production or marketing costs. Instead any licensees will pay BB for the rights to use the BB logo and whatever else they choose to incorporate.
The Priv was the last internally designed phone IIRC, but the volume production occurred elsewhere as it does for all phone vendors. The DTEK50 and DTEK60 are phones designed and built by TCL to a BB specification (as picked from the TCL parts catalogue).
Maybe I'm missing your point?10-09-16 03:21 AMLike 0 - I'm a realist, I don't do faith, just facts and my speculation built on those facts. I'm sorry if my cold reality disturbs you.
Several people here have wondered what the target market is for the DTEK60.
Given that Chen himself has said BB's focus is firmly on Enterprise, the target DTEK60 buyer is surely the same security-focused operations manager that would have bought the DTEK50 instead of the perfectly respectable Idol (for $100/phone less!). I don't know how many (few?) DTEK50's were sold among that 400k quarterly total just announced, but John Chen does, and John Chen has decided to bring the whole Hardware train to a juddering halt within 6-months... so, you've got to reason that those numbers weren't stellar!
And now we have the prospect of the DTEK60. It's bigger, better, and more expensive than the DTEK50... and has no direct Alcatel rival. So, who would buy it?
Those that bought a fleet of DTEK50's a couple of months ago are unlikely to replace them with DTEK60's I'd have thought. And why would those who weren't willing to pay extra for the BB special sauce on the DTEK50 spend even more on a nicer phone for their fleets? I've known a few operations managers in my time, they are hard-nosed, unsentimental business-types who aim to get the most bang for the least buck... and none of them would wish to have a "difficult" meeting with their boss over why they've spent more than they could have on a phone with additional security features, when their existing phone fleet is already adequately protected by the firm's EMM.
I think 50k total DTEK60 sales might actually be optimistic.
The Mercury, if John Chen approves production, is likely to sell better. Though IMO that's mostly due to it being the last true PKB'd BlackBerry evaaar!!! Even I would buy one!10-09-16 03:47 AMLike 3 - I believe that's the wording Chen used in the ER. Up until now BB have paid (from their internal resources) for phones to be built, in the licensing model to come, they won't pay a penny of the design, production or marketing costs. Instead any licensees will pay BB for the rights to use the BB logo and whatever else they choose to incorporate.
The Priv was the last internally designed phone IIRC, but the volume production occurred elsewhere as it does for all phone vendors. The DTEK50 and DTEK60 are phones designed and built by TCL to a BB specification (as picked from the TCL parts catalogue).
Maybe I'm missing your point?
The wording Chen used in the ER was related to the Priv. The Priv was internally designed and then sent out for production, but the risk of same was on BlackBerry. Mercury may also exist in that form, but I suspect it won't be produced from that due to the pivot.
The model BlackBerry has adopted began with the DTEK50 and is what will continue onward. For BlackBerry it is akin to a royalty model; they choose from the catalogs of available devices in reference designs and obtain agreement for minor (e.g. a different back) modifications that bring (for the manufacturer) very little risk. The manufacturer runs however many they choose in a given production run and they bear the risk of unsold inventory, not BlackBerry. In exchange for that they get a material percentage of the profits on sold handsets; BlackBerry gets (a probably fixed per-unit) royalty payment.
This makes handsets a no-lose game for BlackBerry. They at worst make little in royalties, but cannot get stuck with unsold inventory that is then subject to write-downs that hit earnings (or worse, have to be blown out at less than the cost of production.) The manufacturer, for their part, get the risk but at the same time instead of a small and fixed per-unit profit (as is the case for a bulk manufacturing run where contract manufacturers bid against each other for the business) they get most of the per-unit profit on each unit sold AND they get to control said risk since they, rather than BlackBerry, choose the size of the production runs.10-09-16 06:30 AMLike 0 - Yes, you are.
The wording Chen used in the ER was related to the Priv. The Priv was internally designed and then sent out for production, but the risk of same was on BlackBerry. Mercury may also exist in that form, but I suspect it won't be produced from that due to the pivot.
The model BlackBerry has adopted began with the DTEK50 and is what will continue onward. For BlackBerry it is akin to a royalty model; they choose from the catalogs of available devices in reference designs and obtain agreement for minor (e.g. a different back) modifications that bring (for the manufacturer) very little risk. The manufacturer runs however many they choose in a given production run and they bear the risk of unsold inventory, not BlackBerry. In exchange for that they get a material percentage of the profits on sold handsets; BlackBerry gets (a probably fixed per-unit) royalty payment.
This makes handsets a no-lose game for BlackBerry. They at worst make little in royalties, but cannot get stuck with unsold inventory that is then subject to write-downs that hit earnings (or worse, have to be blown out at less than the cost of production.) The manufacturer, for their part, get the risk but at the same time instead of a small and fixed per-unit profit (as is the case for a bulk manufacturing run where contract manufacturers bid against each other for the business) they get most of the per-unit profit on each unit sold AND they get to control said risk since they, rather than BlackBerry, choose the size of the production runs.
One of us has misunderstood completely what Chen said in the ER. It was not restricted to the Priv.
The DTEK production model is NOT the future. That ends by the end of the fiscal year. The licencing model you describe is also not as stated by Chen.
Chen was explicit. Henceforth BB will not design, produce, or sell phones... at all! Any 3rd party can apply to BB to licence BB's logo, and as much of BB's IPR as that 3rd party wants... and the 3rd party will take the entire risk of production and sales. BB will receive a per unit royalty from the 3rd party.
If there are no licensees, or few sales of the 3rd party 'BB' phone, BB doesn't make a dime from hardware.
It's all there in the ER/EC transcript. I got mine from the SeekingAlpha website. It's a interesting read.10-09-16 06:47 AMLike 0 - I LISTENED to the earnings call.
The DTEKs are produced under the new hardware model; BlackBerry bears no risk. The change is that BlackBerry is going to allow licensing as well as outsourced production from reference designs. PRIV was designed in-house. DTEK50/60 were not; they're reference designs from TCL. That is why some are speculating that BB10 may not be dead, in that others could license said OS from them (although that said licensing would be specifically for phones was not said.)
You just contradicted yourself in that you said "BB would not make a dime", yet it was explicitly stated that there's a per-unit royalty in the new model......
I get it, some people want to twist things to suit the "BlackBerry is dead and I want to stomp on Chen's head" meme they enjoy running, but that's not what was said in the earnings call.
The DTEK paradigm is what BlackBerry intends to do in the future. If someone wants to take that and also license the keyboard that's something BlackBerry will now do -- they have previously refused. Thus, there is now the possibility, even in the "no design or manufacturing" world, of additional pkb devices. That is the real change in stance.10-09-16 07:36 AMLike 0 -
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- I have a Classic and it's come to the stage of moving with the times. I read many comments on this forum that tbh could have been written by an anti-BlackBerry mob. BlackBerry suits me perfectly due to the security, HUB and ease of use from a professional standpoint. It's time to upgrade and I've been waiting for this type of phone to be released for quite a while. The DTEK60 can't be compared to the 50, it's simply in a different league.
Just out of interest - did you find the later Priv an improvement on when it was initially released?10-09-16 02:27 PMLike 0 - I will wade in on this conversation, with my limited knowledge (much like the others here) I was of the understanding that the DTek 50 and 60 were designed and built by others. The PassPort, Priv et al were designed in house, but still not built expressly by BlackBerry, but by companies like Foxconn, Wiscon, etc, for BlackBerry. If I understood what Chen said, and that is a huge gamble, the potential next physical Keyboard device will still be designed in house (the last one from what we can surmise), and of course, built by others, much like all the other recent devices.10-10-16 12:48 AMLike 0
- What a tricky game to play...
Say 1 million units costs the same to build as 10 million units, so perhaps making 10 million is better, as you'll have more inventory... but would you make the margin less with 10 million units to make it more appealing to buy? But what if the market only wants 5 million units total? You're stuck with 5 million units that already have low margins. What if you price it higher, pretending you have only 5 million units to sell? You'd make a profit, but now you have 5 million to store and dispose of, which by dropping the price on the second 5 million, would **** off the people who bought into the first five million. If you made less than 5 million, you just lost out of potential sales.
With BlackBerry selling < 1 million phones per quarter, how many DTEK60's would you make?
Posted via CB1010-10-16 01:48 AMLike 0 -
A major cost is producing the initial tooling and molds... say that costs a million bucks. You make 1 phone... you have to sell that phone for more than a million bucks to get your money back.
So you make a million phones... now those fixed costs are divided by a million and each phone has cost a buck to make.
Make 10 million phones, and each phone has cost 10 cents to make.
So, to return to the original post, the difference between making 1 million and 10 million phones is less than a buck per phone.
Welcome to the world of volume production economics.Last edited by JeepBB; 10-10-16 at 03:10 AM.
RobertP1 and StephanieMaks like this.10-10-16 02:58 AMLike 2
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