We won't actually make BlackBerrys anymore because the money is elsewhere: CEO

BlackBerry CEO on hardware

BlackBerry CEO John Chen defended the company's recent announcement that it will outsource its hardware development, saying cutting production costs will set the business up for long-term growth.

Chen said Wednesday on CNBC's "Squawk Alley" that BlackBerry will still have strong ties with the hardware business, but become more of a "royalty factor" that takes ownership of a product's licensing and brand.

Once the hardware design and manufacturing is handed off, BlackBerry will see its revenue go down, but when the new phone begins to ship, it will naturally pick up, Chen said.

The long-term growth predictions come from significant cuts in spending capital. Nearly $100 million to $150 million a quarter was dedicated to manufacturing BlackBerry's devices, a cost that will all but disappear.

Either way, Chen's sights are set on the future of software, not hardware. "We're really more worried about the 'smart' of the smartphone, not the 'phone' part of it," he said.

Whether it's in artificial, smartphone or decision-making intelligence, Chen sees growth, "I actually believe the money [is] in the 'smart;' it's in the software."