Bashing out BlackBerrys : Manufacturing smartphones gave Scotland native inside view of company challenges

From Strathclyde to the Bonnie Banks of the Grand

David Perston took the high road to Waterloo

WHEN David Perston was first offered a job at Research In Motion in the fall of 1996, he wondered if the company was run by a bunch of amateurs. “I told my wife, these guys are nuts. All the big boys were getting out of manufacturing themselves and outsourcing it.”

When he asked to see RIM’s factory, he was told they didn’t have one yet. To top it off, the guy interviewing him, Rick Landry, vice-president of manufacturing, had only started working for RIM a month before.

Everything pointed to a company flying by the seat of its pants. And yet something about the scrappy wireless communications firm, later renamed BlackBerry, made him want to climb aboard.

Perston wasn’t desperate for a job. On the same day of his interview with RIM, he was also interviewed by COM DEV, the space-satellite components company based in Cambridge. But Perston knew he had to act quickly. Fresh off the plane from Scotland with a wife and two children, he needed to start earning a pay cheque fast.

Leaving his native country had not been an easy decision, but he felt backed into a corner. For the past decade or so, Scotland had acquired the title of “Silicon Glen.” Global tech companies from the U.S., Europe and Japan had set up manufacturing operations there to take advantage of government incentives and Scotland’s skilled but relatively cheap labour force.

The son of an engineer, Perston had studied production engineering and management at the University of Strathclyde, graduating in 1983, then spent the next 13 years working in the British defence industry and at several electronics manufacturing services (EMS) firms that did subcontracting work for IBM, Digital and other large tech companies. At one point he helped Motorola set up a big cellphone manufacturing plant in Scotland.

And yet, by the early to mid 1990s, the bloom was coming off the thistle in Silicon Glen. Eastern Europe was looking more promising and the leading tech companies began moving their manufacturing operations there.

Perston took pride in his ability to stay ahead of changes in his industry. In the early 1980s, with computers making inroads in the manufacturing process he joined the computer systems division at Ferranti, a British defence contractor working on fire control systems for the Royal Navy.

Later that decade, with the Cold War fading he left the defence industry and moved into electronics manufacturing. There he learned the fine points of surface-mount technology (SMT), a cheaper and faster way of assembling circuit boards for computers.

Now, with Silicon Glen starting to wilt, Perston knew it was time to pivot again. If he stayed in Scotland, he would have to commute to work—not by car but by plane. Colleagues were flying to companies in the Czech Republic or Hungary on Monday morning and returning by plane on Friday night.

At the same time, his wife was urging a move to Canada. Born in Renfrew, Scotland, her family lived on the same street as Perston but moved to Sarnia, ON, when she was five. Frequent trips back to the home country to visit relatives had kept her in touch with Perston and the two eventually married in 1990.

“My wife was the original girl next door,” he explained. Their route to the altar was circuitous. “I would never recommend it to anyone.” Arriving in Sarnia with their children two months earlier, his wife spotted a newspaper ad seeking a production engineer at RIM the day before he flew to Canada.

For RIM, Perston was almost too good to be true. He had experience in surface-mount and RF (radio-frequency) technology, he had set up factories in Scotland, he had hired people and served as a production manager. “I kind of checked all the boxes.”

By joining RIM, he became part of a unique crew—the unsung heroes and grunts who assembled the equipment and hardware, worked the lines and put together the devices that made RIM and Waterloo world-famous. Look up any BlackBerry annual report or public filing. Manufacturing is barely mentioned.

Two or three paragraphs in those thick, tedious reports are all that’s devoted to where and how RIM made phones. Little mention is made of the factories at home or overseas or the engineers like Perston who logged tens of thousands of kilometres all over the globe to keep them functioning. Much of the glory went to senior executives, designers, software engineers and sales and marketing people.

WHILE Perston was surprised that RIM wanted to do its own manufacturing, he soon learned why. Up until this point in its 12-year history, the company had primarily outsourced production. And it had run into plenty of problems along the way.

In 1994, it won a contract from Ericsson, a giant Swedish telecommunications firm, to make mobile point of sale terminals so merchants at trade shows and outdoor events could process sales wirelessly. But one-third of the modems shipped by Ericsson to be installed in the terminals did not work. This spurred RIM to begin designing and making its own modems. [i]

Among its first attempts was a modem card with an extendable aerial that could be slipped into a slot on a laptop and connected wirelessly to a landline computer. It hired a Toronto firm, Nikom, to build the modem cards but RIM designers wasted too much time driving back and forth to the Scarborough factory to fix problems.

“They (Nikom) knew very little about RF technology,” said Perston. From RIM’s point of view, it was time to bring manufacturing in-house. Problems making the modem cards work efficiently with a laptop ultimately led to a eureka moment for RIM. By ditching the laptop and attaching a small keyboard and flip-up screen to the modem, the result became "the Frankenstein monster that the Bullfrog was,” Perston said. Crude and rudimentary, it was ultimately the world’s first smartphone. Officially known as the Interactive Pager 900, it was nicknamed the Bullfrog because of its bulbous shape.[ii]

By the time Perston started working at RIM just after Thanksgiving of 1996, the company had

found a plant at 131 Shoemaker Street in the south end of Kitchener. It signed a lease and brought in an army of Mennonite workers to knock down interior walls and add a fresh coat of paint. Four million dollars were earmarked to renovate the plant and purchase the necessary equipment, including a circuit board production line.[iii]

In the meantime, Perston and company officials toured other factories in the area including Sutherland-Schultz and Dalsa to see how their plants were set up. Dalsa was of particular interest because it already had an SMT line to make its precision imaging products.

One of their first tasks was to figure out how many workers they would need. About 50 people, including electronic assemblers and SMT process operators, were hired from companies in the area such as Electrohome, Hewlett-Packard and SS Technologies and from area colleges for a January 1997 start.

RIM knew it would have to ramp up quickly. In 1995 it had signed a $16 million contract to make 33,000 modem cards for a Utah company called Megahertz. Later that year Megahertz was acquired by US Robotics, which then tried to get out of the deal. RIM took legal action forcing US Robotics to eventually honour some of the contract.

The fact that RIM would sign such a large contract with so little manufacturing experience further stoked Perston’s worries. “Here was a company (RIM) who was really still in its infancy and it had won a big contract with US Robotics to make T2 (modem) cards,” he said shaking his head.

But the bigger problem was the Bullfrog. “It was an absolute friggin’ nightmare,” said Perston. It was big and bulky with all kinds of secondary processes. “It was not designed for manufacturing.”

The antenna had to be glued to the top housing and the flip-up section to the bezel or frame. Those two sub-assemblies were then ultrasonically welded together. The process was so complicated that the plant could cobble together only five devices a day. Perston and colleagues suggested a fix used on other cellphones to better connect the antenna to the display and the change boosted production into the 100s per day.

Another challenge was the Bullfrog’s “solid state” construction. It precluded repairs. Welding the sub-assemblies ultrasonically meant they couldn’t be taken apart to fix a problem. And the display was soldered to the device, so it couldn’t be swapped out. “When you have a relatively expensive device, when you bring it back you don’t want to just throw it in the garbage, you want to be able to reuse as many parts as possible.”

A picture taken at Shoemaker in 1997 when the first batch of Bullfrogs was ready for shipment shows about 60 employees gathering around a stack of boxes. RIM co-CEO Mike Lazaridis is visible on the left dressed in white shirt, tie and suspenders.

While RIM used SMT pick-and-place machines to assemble the printed circuit boards, some components had to be soldered by hand guided by a microscope. They were tiny, ranging in size from 1.5  to 0.75 millimetres, noted Perston. Today they're even smaller, shrunk down to a svelt 0.4 to 0.2 millimetres, too small to be seen by the naked eye. “It’s really fine shit,” he added. 

WHEN the release of the Pager 900 was six months late and sales failed to take off, Perston’s skepticism deepened. “Nothing happening that first year really convinced me that RIM could do it.” His job gave him a unique window into the company’s challenges. “Working in manufacturing, I had much more visibility as to what was happening with the company in the early days.”

RIM’s next-generation device, the Interactive Pager 950, also known as the Leapfrog, released in 1998, was much easier to manufacture. Gone was the clamshell configuration. In its place was a simpler device shaped like a bar of soap with a screen on top and a keyboard underneath. “Not only was it (the Leapfrog) manufacturable in large volumes, it was repairable as well,” said Perston.

Soon upgraded and renamed the BlackBerry, its sales took off. That meant the Shoemaker plant had to go flat out. Staffing more than doubled and the factory moved to three shifts a day five days a week, then to 24-7 production. “As production manager, I never slept,” said Perston.

He would come in at 6:15 am, talk to night shift workers before they went home, stick around all day to monitor the day shift and not go home till 7 pm so he could chat with afternoon shift workers when they came in. “Someone once told me, you go old and grey in operations, and he was right.” Carolyn Witmer, one of the early assemblers hired at Shoemaker, said Perston was good at boosting morale when spirits were flagging. During some of the really long days working on the lines, “he would huddle us together and motivate us to get the work done,” she said.

Sometimes, when the workforce was still small, he would suggest celebrating after a tiring day. “If we had a big run to do, if we had a big inventory, Dave would say let’s all go out and have a few drinks and wings.” At the same time, Perston made it clear who was in charge.

“He’s very abrupt when he deals with you,” said Witmer, who attributed his candor to his Scottish background. “But people respected that about him. He had a lot of respect from all of us.”

Launching a factory from scratch meant more than just staffing the plant. A whole eco-system of suppliers, shippers and logistics teams had to be built to support the facility as well. “There was no real knowledge base in town here for building RF (wireless) products,” Perston noted.

At some point, Perston went back to Scotland and hired engineers, technicians and managers from the old Motorola plant and brought them to RIM. Over the next three to four years about 50 workers in total, dubbed the “Scottish mafia,” came over to bolster the manufacturing operation at RIM.

“We were struggling to get people. We couldn’t get people to come from the U.S., Toronto or Ottawa so we had to look elsewhere,” said Perston, who in a sense was Don of RIM’s Scottish mafia. Workers in Toronto thought “you only came to Waterloo to go to university or to die,” he noted with a laugh.

Bob Brackpool was one of the engineers brought over from Motorola in Scotland. He recalls being interviewed at the Edinburgh airport, then flying over for more interviews at the Shoemaker plant. Perston was supposed to meet with him at the end of the day, but he was late and then didn’t conduct a normal interview. “It was more picking my brains to see how I would introduce a high-speed production line for SMT products,” Brackpool said with a laugh. “Dave was always looking at what’s coming next.”

He also didn’t like to sit still. “He was going like 100 miles an hour in 100 different directions,” said Brackpool. With Shoemaker bursting at the seams, RIM knew it would need another plant. Early in 2000, it purchased the Stack-A-Shelf factory at 451 Phillip Street in Waterloo, not far from RIM’s headquarters and just north of the University of Waterloo. It was eight times the size of Shoemaker. RIM took three-quarters of the building and let Custom Leather, a tenant, stay in one section. Production wasn’t expected to start until 2001.

“No sooner did we walk in, then the dot-com bubble burst,” Perston said, referring to the crash of overheated tech and internet stocks on various stock markets, plunging the industry into a global recession. Volumes dried up and employees had to be laid off. Perston thought RIM would never fill the new Phillip Street facility. But three years later, Shoemaker had been closed, Custom Leather was gone and the company was adding an extension.       

A picture from 2003 shows about 150 employees at the Phillip Street plant gathered for a group photo, many of them dressed in blue work shirts and jackets. A mechanical assembly line and testing equipment are visible at the back. The photo is a rarity as Lazaridis did not allow media tours or pictures to be taken inside the plant, fearing they would divulge proprietary information to competitors.

“There was huge secrecy about what we were doing,” said Brackpool. Even so, as facilities manager at the Phillip Street plant, he often gave unofficial tours to investors, insurance people and government representatives.

When Queen Elizabeth came for a tour in 2010, “we spent a small fortune sprucing up the plant,” he noted. He even disconnected an automatic door so he could open it manually for Her Majesty.

EVEN though BlackBerrys were selling briskly, it was still a juggling act. Issues like an outbreak of the SARs virus and the massive power blackout of 2003 threw a wrench into the works.

“The first four to five years were like walking along the edge of a cliff. The wind always blew us onto the land side,” said Perston.

Sometimes production had to be altered to match what shareholders were told during quarterly reports. “We would be pulling our hair out. Either you had to ship the exact number, or they didn’t want us to ship too many more because they wanted that for the next quarter.”

Even before they closed Shoemaker, Perston and other managers started to think about contracting out some of the work. The SARS outbreak was a wake-up call. RIM realized it could not rely on just the Waterloo plant to make BlackBerrys. When they pitched the idea of out-sourcing to senior managers, including co-CEO Jim Balsillie, some balked.

“Jim was skeptical. We’re going to set up a factory in Mexico or Eastern Europe and we’re not going to have our name on the building?” he wondered.

Perston and Landry explained the situation to him. “You go to those parts of the world, it’s not just the cost of doing the stuff. You have to understand the politics of how things work in each of those countries,” Perston noted.

“It would be a pure distraction for us to go and do this ourselves.” Once they got the okay, Perston and other RIM managers started visiting some of the top EMS companies, including Flextronics based in Austin, Texas, and Celestica, IBM’s old manufacturing unit in Toronto. Celestica had an opportunity to build the original RIM modem cards, but “they said come back when you’re a big boy,” noted Perston.

While doing their research, they landed on a Finnish company called Elcoteq. Much of its business was making cellphones for Nokia and Sony-Ericsson. Flextronics and Celestica had little experience in wireless, whereas Elcoteq “absolutely understood the industry.” Elcoteq had recently lost some business with Sony-Ericsson and was looking to fill a hole. Moreover, they were a small company, which offered some advantages. “We were a much bigger fish in a small pond and they (Elcoteq) had all the RF knowledge and the facilities where we wanted them,” he said.

Elcoteq had factories in Monterrey, Mexico; Pecs, Hungary; and Beijing, China. RIM ended up using the Mexican and Hungarian plants to manufacture BlackBerrys starting in 2005, but not the facility in China because of concerns about technology and intellectual-property theft.

The Mexican and Hungarian plants gave RIM three factories, including the Waterloo facility, where BlackBerrys were produced to supply customers around the world.

The decision to outsource meant he had to do a lot more travelling. “I never saw my kids,” said Perston. “I don’t know how my wife managed to get through daily family life of four young kids when I was an absent father.” The irony was that he left Scotland to avoid travelling, but by the end of his career at BlackBerry he spent 80 per cent of his time on the road.

As RIM’s business grew, it needed to add more volume to its supply chain and began looking at other EMS partners including Celestica, Flextronics, a Florida-based firm called Jabil and a Taiwanese company called Wistron. Meanwhile, by 2008 Elcoteq was running into turbulence. Nokia, its main customer, was switching manufacturing to Foxconn in China and there were rumours that Elcoteq might fall into bankruptcy. This hastened the need to bring on other partners.

By 2011, BlackBerrys were being manufactured at 10 plants outside Canada: four in Mexico,

four in Europe, one in Brazil and one in Argentina, Perston said. The Brazilian factory was located in Sorocaba, an industrial city west of Sao Paulo, but the Argentinian plant was particularly remote. It was located in Tierra del Fuego at the southern tip of the continent.

Argentina chose this area because it wanted to stimulate the economy in an underdeveloped area. But it was also worried that Chile, which occupies the western half of Tierra del Fuego, had designs on Argentina’s portion. “In all my life, I never thought I would ever go to Argentina, let alone Tierra del Fuego,” Perston said, “You’d get off the plane and you’d see a sign, ‘Welcome to the end of the world.’"

CONTRARY to popular opinion, it wasn’t cheaper to outsource manufacturing, Perston said. Labour costs were often lower overseas, but they only accounted for about 10 per cent of expenses. The rest went to bills of materials or BOM costs, in other words all the raw materials, components and machinery that went into the phone or device.

It’s more important to manage BOM costs, he noted, by designing a product to minimize scrap and waste. All things considered, it was still worth it to outsource because it allowed RIM to focus on its next-generation products and leave the politics to third-party producers.

Mexican cities like Juarez, Guadalajara and Monterrey “were always a bit iffy. The cartels were always kind of fighting,” noted Perston. “The Jabils, Flextronics, Celesticas and Wistrons had to deal with that and some of the local politics. We didn’t have to manage that.”

RIM paid a premium for outsourcing, but those were the days of larger profit margins, so it was worth it, he noted.

With RIM now making a global footprint in manufacturing, Perston’s hours only got longer. The only days he took off were Christmas Day and New Year’s Day. On Boxing Day, he’d be on the phone with plants in Mexico and Europe and still be on the phone at 10 p.m. with suppliers in Asia. Suffering from burnout, he took a four-week leave of absence in 2007, telling Landry he didn’t know whether he would be back. The break recharged his batteries and he was able to return to work.

Around that time the iPhone made its debut. It presented new challenges not just for the designers and software engineers. When they tore apart the iPhone, “all of us were a bit surprised at how much was packed into it,” said Mike Greening, who worked in process development at RIM.

They soon realized that many of the components in Apple’s smartphone could only be assembled by hand, said Greening, noting that that was why Apple hired Foxconn in China to manufacture the iPhone. This was a new headache for Perston and his team. “Dave was instrumental in us looking at how other smartphones were designed and built,” said Greening.

Juggling RIM’s suite of BlackBerrys, which came in different shapes and sizes, was a challenge as well. Reconfiguring assembly lines was difficult when a new model was introduced. “When you try to automate something, it takes a long time to get the automation down,” noted Perston.

RIM was able to handle the various models by assigning each to a different assembly line, noted Brackpool. But it was always a struggle meeting the expectations of designers. They wanted to pack as many features into a phone as possible, whereas manufacturers preferred simplicity, he said.

Perston’s Scottish sense of humour helped him navigate the choppy waters, said Brackpool.

“He had a cheeky rapport with all levels of the organization.” Perston’s last position at the company was senior director of new product introduction. In that role, he had to manage all the plants and capacities while new BlackBerry models were introduced.

In the early years, RIM would begin production of a new model at its Waterloo plant to get all the kinks out, then move manufacturing to off-shore plants. “As things got kind of crazy, we needed to ramp all the factories at the same time,” he said. “It was why I spent so much time on the road.”

THE BlackBerry Storm was a particular challenge. It had a unique haptic touchscreen. Users

felt like they were pushing a button on a physical keyboard as they tapped out a message. But problems were numerous and customers returned many of the devices.

“It was a very appropriate name,” Perston said of the Storm.  He spent two years running back and forth to Mexico trying to fix the problems and ensuring the EMS partners were assembling the device properly. “It was the first time we really failed to execute.”

Finally, in 2011, he had had enough and parted ways with the company. With the iPhone dominating the smartphone market and the Android phones coming on strong, RIM’s prospects were bleak. “I could see the way it was going,” he said.

“The first 10 years were fun, we were doing something new, something different. The last five years just became execution of numbers,” Perston said. “It just became brutal. Nobody remembered the 99 things you did well. Screw up one thing and you’d have somebody on the phone pissed off.”

He took two years off then accepted a job as vice-president of manufacturing at the Waterloo startup Thalmic Labs, makers of wearable tech including smart-glasses that connected to the internet. Later renamed North, Thalmic raised about $200 million but its smartglasses failed to gain much traction and Perston left the company in 2018. It was acquired by Google in 2020.

Many of the tech giants, including Amazon, Google and Intel, have poured money into smartglasses but it’s not a product that the public is ready for, he said. “There’s no killer app there.”

Nowadays, he works as a consultant in supply chain and manufacturing operations.                Looking back on his 15-year-career at RIM/BlackBerry, he believes the company’s decline can’t be blamed on its manufacturing division.

“I still maintain all the decisions we made were the right ones.”

[i] BlackBerry: The Inside Story of Research In Motion, Rod McQueen, Key Porter books, 2010, p. 86.

[i] McQueen, p. 101.

[iii] Waterloo Region Record, Nov. 12, 1996.