A Call for Licensed Handsets

Are mobile handsets the next consumer electronics sector to be headed away from manufacturing and toward a licensing model?

Last September, shortly after discontinuing its own manufacturing operations to focus on software development, Blackberry licensed its brand to BB Merah Putih, which is sourcing, distributing, and marketing Blackberry devices in Indonesia, the brand’s strongest market. It then signed other local licensing agreements in Bangladesh, India, Nepal, and Sri Lanka. In December, Blackberry licensed its brand to TCL, a Chinese firm that had previously contract-manufactured Blackberry devices, to make and sell Blackberry handsets in all other markets globally.

Blackberry followed in the footsteps of Nokia, which sold its device-manufacturing business to Microsoft in 2014, granting the latter temporary control of the Nokia name. Last May, Microsoft sold the business to two companies, FIH Mobile and HMD Global, returning the trademark rights to Nokia. Nokia granted HMD Global a 10-year licensing deal to create Nokia-branded mobile phones and tablets for worldwide distribution (excluding Japan). HMD announced last month that it was debuting its inaugural product, a basic feature phone of the sort still popular in many international markets, with Android-based smartphones expected in 2017. While HMD has control of sales, marketing, and distribution, it will work with FIH on manufacturing, engineering, and other aspects of the business.

Nokia’s and Blackberry’s recent activities suggest that smartphones may follow other consumer electronics categories, notably cameras and televisions, in the direction of licensing rather than manufacturing.

As a result of well-documented industry challenges—such as the transition from film to digital and the replacement of cameras by smartphones—Polaroid, Kodak, and AgfaPhoto have all become licensors, for the most part, rather than manufacturers, with their cameras produced by Sakar, JK Imaging, and Plawa, respectively. (Sakar, a leading marketer of licensed cameras and other consumer electronics, purchased the Vivitar brand and offers cameras and accessories tied to that name.) Most of the IP owners have expanded beyond cameras and/or film into all sorts of licensed photo imaging and other consumer electronics categories (including smartphones).

Meanwhile, TV makers moved from in-house or contract manufacturing to a brand-licensing model years ago, with their low-margin TV sets being produced by mostly Asian licensees. Examples include JVC (with AmTRAN), RCA (with On Corporation), Sharp (with Hisense, although Sharp reportedly wants those rights back), Toshiba (with Compal), Westinghouse (with TongFang), and Magnavox, Philips, Sanyo, and Sylvania (all with Funai), among others across the globe.

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