A year into Google’s attempt to build Motorola smartphones in the U.S., the company finds itself making new plans… to shut the factory down. The Motorola Mobility handset unit will close its Texas factory by the end of this year, barely a year after it opened as the first smartphone factory in the U.S.
The factory opened in May 2013 in Fort Worth, Texas. The handset unit’s chief executive at the time, Dennis Wooside, said the plant would challenge conventional wisdom that manufacturing in the U.S. is too expensive. The plant was shipping out 100,000 units a week and had the capacity for tens of millions of yearly orders. At its peak, the plant employed as many as 3,800 people. Today the factory employs about 700.
While the Texas factory allowed Google to stamp the phone with "Made in the U.S.," assembly is just the last step in the manufacturing process and accounts for relatively little of the cost of a smartphone. The cost largely lies in the chips, battery and display, most of which come from Asian factories, according to an AP story. Having the plant in the U.S. enabled Motorola to offer a quick turnaround and direct fulfillment for customized, built-to-order devices. So where did it all go wrong?
The plant’s future was first questioned when Google announced plans to sell Motorola to Lenovo four months ago. Lenovo expected to turn around Motorola in a just a few quarters, but that would have to include making some cuts. Since Motorola is no longer the powerhouse it once was, and the Moto X not selling as well as expected, the company has been bleeding hundreds of millions of dollars each quarter.
According to a Wall Street Journal article on the plant closure, market researcher Strategy Analytics said Motorola sold 900,000 Moto X smartphones world-wide in the first quarter. By comparison, Apple Inc. sold 26 million units of its newest iPhone 5S in the same period. It certainly appears that Motorola had a ways to go before regaining the market share needed to be a contender in the mobile phone market again.
In a time when manufacturing appears to be resurging in the U.S., it’s disconcerting when such a big company isn’t able to make U.S.-based assembly work for them. Were Google and Motorola too ambitious in opening the plant in the U.S. at this time? Or is the plant’s failure solely due to sales figures? What does this say about the price of reshoring and American manufacturing? Is Motorola giving up too soon? Leave your comments below.