The EMS provider Celestica Inc. (NYSE, Toronto: CLS) has announced it is winding down its manufacturing relationship with BlackBerry (Nasdaq: RIMM; Toronto: RIM), the struggling maker of the BlackBerry. Celestica said that the restructuring charges will not exceed $35 million, and that disengaging with RIM will take three to six months.
Celestica gave no indication which party initiated the breakup. In April, it told analysts during a regular earnings conference call that it had been working with RIM as it reassessed its supply chain strategy.
Ending a manufacturing partnership is time-consuming and can be costly for both the EMS and the OEM. (See: Apple & Foxconn: Breaking Up Is Hard to Do.) According to the Globe and Mail of Toronto, Celestica gets as much as one-fifth of its overall revenue from RIM.
The EMS consulting firm Charlie Barnhart & Associates told us in an email that it can take as long as three fiscal quarters to dismantle an outsourcing pact.
"Obviously, there is a range on this data point as well, but that number is extremely hard to pin-down as it's much more complicated to determine when the 'initial internal discussion' (re: the disengagement) actually took place," Barnhart said. "Plus many of the failed cases we study drag on for several years due to material liability issues, legal proceedings, warranty related claims, etc."
Celestica is expected to offer more details during its second-quarter earnings release and conference call, which are scheduled for Friday, July 27.
Well, I seriously wish RIM all the luck in the World. They really revolutionized smartphones and mobile chatting (IMHO). What they need to do now is reinvent themselves, or at least, pick their battle - one they know they can win.
@Timmor: With advent of very high level of automation, this is very low skill work. Most people can be trained for this type of work. Output of worker is very much controlled in this type of environment.
@_hm: So their productivity and efficiency is not a concerned even if they are semi-skilled labor? I think these factors should matter a lot to ensure the efficiency of the output.
RIM product everything became questionable a long time ago. Instead of cutting costs, they need to refocus on their core objectives (whatever that may be at this point in time)
@Timoor: In production environment, techs follow strict instruction given to them which in turn comes from designer in other country. This will not make much difference. But sometime, management takes short cuts and that is of more concern.
Elctrnx, I think still RIM can work it out for a better plan as part of sustainability. RIM has to diversify its R&D and production facility to Tablets and Smart phones with 3G/4G capabilities. Most of the 3G phones from blackberry (except High end models) have no video calling facility. Another area is they have to rework the Play book with most soficated facilities/functionalities and to be independent of networks.
Barbara, actually what happens for the mobile industries. If we are analysis the market we can see that Nokia is on the way of shutting down and now RIM also follows it. Intel gave up their mobile chip plans and today I had read that semiconductor firm Renesas Electronics Corp. could sell its mobile chip subsidiary, Renesas Mobile Corp. According to industrial analysis, most of the developments are going to happens in communication sector, which includes Tablet and smartphones. But in day to day life we are hearing only about negative news.
AT first I thought Celestica initiated the breakup because RIM is so unstable. But reading that RIM accounts for one-fifth of Celestica's revenue puts some doubt in my mind. Celestica will have a hard time replacing that, particularly if it is going after mobile equipment. I believe the EMS also mentioned some repositioning, so maybe they will go after a different market.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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