‘Back to U.S.’ trend? Google to build smartphones in Texas
Some experts see it as less a business strategy than a public-relations move, but Motorola Mobility officials say there are advantages in having a factory close to the engineers designing their new Moto X smartphone and the customers they hope will buy it.
The Washington Post
Motorola Mobility, once a pioneer in shifting manufacturing to China, is opening a smartphone factory in Texas, the company said Wednesday, joining a small but growing movement toward bringing technology jobs to the United States.
The decision follows announcements by major tech firms, including Apple and Lenovo, planning to add U.S. manufacturing capacity after more than a decade in which the flow was almost exclusively in the other direction — with millions of jobs going to East Asian factories known for low wages and minimal labor protections.
The shifts to the United States are fledgling, and some industry experts say the companies are motivated less by long-term manufacturing needs than by public-relations strategy. At a time of rising governmental scrutiny of technology companies, analysts say, there are few better ways to acquire allies on Capitol Hill than to create manufacturing jobs in lawmakers’ home districts.
But Motorola Mobility officials said they see significant business logic to having a factory close to the engineers who are designing a new flagship smartphone and the customers they hope will buy it. Officials say it aids innovation while allowing for leaner inventories and lower shipping costs.
“Doing that work of actually assembling the phone close to home will allow us to fix things faster, innovate faster,” said Dennis Woodside, chief executive of Motorola Mobility, a division that was bought by Google last year for $12.5 billion.
The new smartphone, the Moto X, will be the first designed entirely under Google’s ownership. It also will allow the company to capitalize on rising consumer preference for U.S. manufacturing; nearly two out of three Americans said they would pay more for an American-made product, a Gallup poll found in April.
The Moto X will be the first smartphone assembled in significant numbers in the United States since the launch of the iPhone made sophisticated mobile devices a key driver of growth in the technology industry, Motorola officials said. Americans are estimated to own 130 million smartphones, overwhelmingly built in East Asian factories. Many of the Moto X’s roughly 1,100 component parts will still be made overseas, the company said.
The competitiveness of American factories is helped by rising labor costs in East Asia — though wages there are still much lower than in the United States — and falling energy costs.
East Asia remains home to most suppliers of electronics components, a long-term advantage that will make it difficult for a large percentage of high-tech manufacturing jobs to move to the United States, some analysts say. Previous pushes to attract more factory jobs have largely fizzled in the face of competition from East Asia and Latin America.
“This is Groundhog Day, big time,” said Timothy Sturgeon, an MIT researcher on globalization. “On the other hand, this doesn’t mean that this isn’t significant news.”
The United States lost 5.5 million manufacturing jobs, about one-third of the nation’s industrial workforce, between 2000 and 2009, said the Alliance for American Manufacturing, an advocacy group founded jointly by industry and the United Steelworkers union. The outward flow of jobs has stabilized in recent years, with the numbers of factories opening and closing roughly equal.
Within the tech industry, Chinese computer maker Lenovo announced in October that it would build laptops and tablets in North Carolina, and Apple said this month that it would invest $100 million in a plant to assemble some of its Mac computers in Texas. Google, meanwhile, is producing the initial versions of its wearable Glass mobile devices in California.
“You would have said five years ago this would have been impossible,” said Scott N. Paul, president of the Alliance for American Manufacturing. “It’s interesting that you’re seeing this getting started now. It’s possible this could be part of a larger trend.”
Motorola was among the earliest and most aggressive U.S. companies in moving manufacturing to China in the 1990s, at a time when relations between the countries were still raw after the bloody crackdown at Tiananmen Square. Motorola developed a commanding position in the cellphone market, but has seen its market share gradually erode as Apple, Google and Samsung have emerged as the industry’s key innovators. (Motorola later spun off its cellphone division, Motorola Mobility, and renamed the remaining parts of the company Motorola Solutions).
Motorola’s partner in the Texas project, global contract manufacturer Flextronics, has leased a 481,000-square-foot factory — about the size of eight football fields — in Fort Worth and has begun recruiting the nearly 2,000 workers who will assemble the Moto X, to be released this summer. The factory, built by cellphone maker Nokia in the 1990s, had employed 3,800 people at its peak before it was closed in 2007, according to news reports at the time.
The Moto X, company officials said, will streamline some common functions, such as taking a picture, to make the process faster and easier for users. The Texas factory will produce smartphones for the U.S. and Mexican markets, allowing faster shipping times and making it easier for engineers to make design tweaks — such as colors beyond the standard black or white — in response to shifting customer tastes, officials said.
Company officials hope to make millions of smartphones in Texas, though the volume of production will depend on the popularity of the Moto X.
“It’s definitely designed to have a much different look and feel than other smartphones and a much purer Google experience,” said Mark Randall, senior vice president for supply chain and operations for Motorola Mobility.
The Fort Worth factory is in a foreign-trade zone, which has tax advantages for exporters, and is near an international airport, a FedEx shipping hub and a distribution center for AT&T, a wireless carrier that is a major seller of smartphones.
“Motorola Mobility’s decision to manufacture its new smartphone and create thousands of new jobs in Texas is great news for our growing state,” Gov. Rick Perry said in a statement. “Our strong, healthy economy, built on a foundation of low taxes, smart regulation, fair legal system and a skilled workforce is attracting companies from across the country and around the world.”
Governors and members of Congress typically are avid protectors of major manufacturing employers, potentially important now with tech firms under fire in Washington, D.C., for their tax strategies, privacy policies and, in the case of Motorola parent-company Google, allegations of monopolistic behavior. Reports about labor unrest and dangerous working conditions at East Asian technology plants also have generated unwanted publicity for some tech companies.