BlackBerry Q5 has an uphill battle; emerging markets are even more competitive: Nowak

How do you compete with a $50 Chinese-made Android?


(Photo: BlackBerry)

With BlackBerry announcing its new Q5 smartphone, it’s clear the company is looking to shore up its offerings in emerging markets. The device, which features a QWERTY keyboard and runs the latest BlackBerry 10 operating system, will be available in Europe, the Middle East, Africa, Asia and Latin America as early as July. While the company hasn’t yet announced pricing, the Q5 is intended to be a low-cost option for people who obviously don’t have as much disposable income as people in the West.

It’s a necessary move. Emerging markets have largely kept the company aloft over the past few years while its popularity swan-dived in more developed countries.

However, with the dual competitive reality of Google’s Android and Chinese phone manufacturers in these markets, the question quickly becomes: will the Q5 be enough?

Android overtook Nokia’s Symbian and BlackBerry as the leader in just about every emerging market some time ago, and it’s entirely understandable why. Google is coming at the smartphone market for very different reasons than just about every other player. Unlike BlackBerry, Apple and other Western-focused vendors, the search giant is far more focused on getting people in developing countries onto the internet and using its services. There’s much more money in that for Google than there is in a simple margin on the device that connects to the Internet. In that vein, the company is very much a market disruptor, and this is even true in developed countries where it routinely releases Nexus phones and tablets with significantly lower prices than competitors.

By providing its operating system for free, Google has opened the smartphone market door to just about anyone who wants to get into it. And boy, have they ever got into it. In the West, we know the big Android makers as Samsung, HTC, Sony Ericsson and Motorola, but for most of the world, the manufacturers making and selling Android devices are Chinese companies such as Huawei and ZTE, which are more interested in moving sheer volumes of units than reaping fat margins on them. ZTE, which shipped 35 million smartphones last year, posted a mere 16% profit margin on them, which is a far cry from the likes of Apple’s near-60% margin on the iPhone.

Put those two factors together and you get $50 Android phones in Africa (and yes, that’s $50 flat, no contract). Can BlackBerry match such prices with devices like the Q5? Given that Huawei and ZTE each ship nearly double what the Canadian company does, it’s unlikely.

That puts the Q5 in a weird spot. There are certainly better-off customers in many emerging markets that will inevitably trade up from their cheapo Chinese-made Android phones, perhaps to a BlackBerry, but does that then make the Q5 a high-end device in such places? And what of its actual high-end phones, such as the Z10 and Q10?

Some analysts are wondering the same thing.

“BlackBerry is clearly aiming to replicate the success of the BlackBerry Curve in emerging markets,” says Adam Leach, principal device and platforms analyst at Ovum. “However, BlackBerry has significant competition in this area with a number of handset manufacturers championing an array of low-cost Android devices as well as Nokia’s Asha 501. The crucial aspect of the Q5 launch will be its price and if BlackBerry can address the sub-$100 smartphone opportunity.”

There’s no two ways about it. While BlackBerry has a tough battle on its hands in developed countries, the fight looks to be even more fierce in emerging markets.