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US Tech Investments Are Only Skin Deep

Motorola Mobility is the latest technology company to announce that it will open a United States factory.

That means more jobs, more high-tech investment, and an expansion of Motorola Mobility's electronic supply chain to accommodate the production of the company's next smartphone.

Motorola Mobility, which was acquired by Google, will provide original equipment manufacturers with a case study that will help them evaluate whether the US is ready to make smartphones and potentially other consumer electronic devices.

For a start, we will see how quickly Motorola Mobility can fill the estimated 2,000 new jobs, and many will be eying the quality of engineers and other highly skilled workers who will be asked to assemble Google's next phone, the Moto X.

In a New York Times article, Dennis Woodside, the head of Motorola, is quoted as saying at the All Things D conference recently that the Texas factory will facilitate Motorola's ability to “iterate and innovate much faster.”

In the world of smartphones, where Apple Inc. and Samsung Electronics Co. Ltd. dominate the market, consumer behavior changes with speed and unpredictability. Motorola must know that it will need talented engineers, prodigious sales, and marketing expertise, and a nimble supply chain network to succeed.

I'm sure due diligence was done before Motorola decided to open the Texas plant, but hovering around Motorola Mobility are reminders of how quickly tech giants can fall and plans can change.

As example, Motorola's 500,000-square-foot building was once the manufacturing plant where Nokia employed 16,000 people 15 years ago.

Then there are the memories of the Nexus Q, a home media player Google had hoped to assemble in California. This was Google's first stab at building its own hardware, but plans quickly disintegrated last year when poor reviews of the product delayed development.

US attracts tech investments in dying products
A closer examination of recent announcements related to consumer electronics manufacturing in the US should cause concern and raise the issue of what OEMs, contract manufactures, and others think is possible and where to draw the line.

Why is it that Lenovo Group Ltd. and Apple are ready to manufacture PCs in the US, a segment of the market that has seen declining sales across the globe? Unlike these two, it seems other technology companies are still opposed to manufacturing products in the US, especially those items that are seeing greater consumer demand and more vigorous supply chain activity.

Lenovo's US manufacturing plans are on a much smaller scale compared to Motorola. The company will create 115 jobs and manufacture PCs at its 240,000-square-foot Whitsett facility, located approximately 10 miles east of Greensboro, NC.

The decision by Apple to invest $100 million this year and shift the manufacturing of Mac computers from China to the US is welcome news, but, like Lenovo, Apple's desire to make products in the US has its limits.

Reports that Apple picked Taipei-based Pegatron Corp. to assemble its new lower-priced iPhone means two things:

  1. Apple wants to depend less on Foxconn Technology Group and is seeking to diversify the manufacturing of its smartphones.
  2. Apple is not confident that the US has the manufacturing skills to assemble its leading products.

Apple CEO Tim Cook may still believe his assessment of US manufacturing as told to Brian Williams last year: “Over time, there are skills that are associated with manufacturing that have left the US. Not necessarily people, but the education system stopped producing them,” Cook said.

In the meantime, technology investments in the Asia-Pacific region and other parts of the world continue at a robust pace. Dell Inc. recently began operations at its facility in Chengdu, capital of Southwest China's Sichuan province. The company employs 1,500 workers there. Jabil Circuit Inc. recently announced that last September the company completed construction on a brand new, 273,000-square-foot facility.

Added to this that John Chambers, CEO at Cisco Systems Inc., recently told the Financial Times that he is looking to invest in Canada and Europe.

All indications are that many high-tech companies still don't see the US as an attractive location to open manufacturing operations when compared with other countries. Unfortunately, this may be the case for decades to come.

11 comments on “US Tech Investments Are Only Skin Deep

  1. Suzanne.Deffree
    July 11, 2013

    “Re-shoring” manufacturing is certainly something to watch. So far much of what's been done could be interpreted as minor gestures and not true action. Time (and logistics) will tell if these actions signal a solid return to US manufacturing.

  2. _hm
    July 11, 2013

    Perhaps, with one cycle like this, the unions are removed and wages are half or less, with no long term benifits. This way manufacturing cost is lower and more re-shoring will be in pipe.

     

  3. prabhakar_deosthali
    July 13, 2013

    Such small initiatives may be only a gimmick to show the US govt and US public that yes! the manufacturing is going to return to US. If Lenovo and such other companies are serious about bringing manufacturing back to US then they should bring their current leading technology products Assembly lines to US.

  4. elctrnx_lyf
    July 14, 2013

    Manufacturing in usa is under the lens for a long time now. The solyndra case was one example where it proved it is really difficult to compete with chinese mnufacturers. The best strategy for USA would be to develop more talent with expertise in high level system integration. This could definitely help in the long term

  5. itguyphil
    July 15, 2013

    It also means more opportunities in other areas. With innovation comes shifts in the workforce. The important factor is if you can notice these shifts BEFORE they happen.

  6. FLYINGSCOT
    July 16, 2013

    It is sad to hear that the US may have lot its edge when it comes to manufacturing competitiveness.  It is doubly sad that the education system is not pumping out the correct calibre of worker.  I hope the US govt intervenes to address this.

  7. The Source
    July 17, 2013

    Pocharie,

    It's interesting that Motorola Mobility through its Advanced Technology and Projects (ATAP) group is collaborating with eight US research universities to boost innovation and US competitiveness.  Here's the link to more information: http://tinyurl.com/mcdu2gh  

  8. itguyphil
    July 17, 2013

    That's a bit of an exaggeration. That isn't the only shift

  9. itguyphil
    July 17, 2013

    I agree. That boost in competitive-ness isn't the result of all jobs being replaced.

  10. Houngbo_Hospice
    July 17, 2013

    Lowering manufacturing costs by re-shoring production is just a short term solution. Workers will always find a way to fight back for wage increase and social benefits when they notice that the company is taken advantage of them or when they feel exploited.

  11. SunitaT
    July 20, 2013

     If Motorola Mobility sees an opportunity to get a piece of the smartphone market
    share in the US, they are going to seize this opportunity. Moreover,
    they may be able to turn the tide with their numerous jobs that are
    being offered that will attract technicians and other people.

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