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Motorola and Flextronics bringing smartphone manufacturing to Texas

By: Rhoda Miel

May 30, 2013

Google Inc.’s Motorola Mobility group and Flextronics International Ltd. are bringing the first smartphone manufacturing to the United States, building the new Moto X at a Texas plant that was once home to cell phone manufacturing for Nokia.

Executives for Flextronics hint that the Fort Worth plant is the first ripple of a tide of new electronics production in the region that will include new wearable electronics.

“It’s not just about cell phones,” Flextronics CEO Mike McNamara said during a conference and webcast with analysts on May 30. “It’s about being part of an [manufacturing] eco-system. We don’t know everything it’ll entail, but we know we’ve been picked as [Motorola and Google’s] partner going forward.”

Motorola CEO Dennis Woodside teased some features of the Moto X during the All Things D technology conference, held May 29 in Rancho Palos Verdes, Calif.

In addition to the technology within the phone — which Dennis Woodside said will be able to anticipate a user’s needs — the phone with be a flagship product designed, engineered and assembled in the U.S., running on the software platform from Moto Mobility owner Google of Mountain View, Calif.

The new production site is a nearly 500,000 square foot plant within a free trade zone in Fort Worth that once employed 6,000 people making phones for Nokia. The site will eventually employ 2,000, with Flextronics as Motorola’s manufacturing partner.

Bringing production to Texas is more than good public relations, Woodside maintained. Regional manufacturing is a good business decision.

“[With distance] you lose the ability to innovate. You lose the ability to make fast changes,” he said.

Motorola, with designers in Illinois and California, will have far closer and easier contacts with production Texas.

The companies are not talking specifics about the type of manufacturing in Fort Worth. The Moto X will rely on a traditional supply chain, with processors made in Taiwan and organic LED screens from South Korea, Woodside said. But 70 percent of the assembly will occur in Texas.

Singapore-based Flextronics is looking to invest in its plastics and automation as part of its global long-term business plan, said Chief Strategy Officer David Mark. Automation, especially, will be key for an industry that is seeing rising labor costs in China — and growing interest in manufacturing in North America.

“What you’re looking at now is a shift not just from low cost but to where supply chains are making it possible to shift to a regional footprint,” said Tom Linton, Flextronics’ chief supply chain officer. “Labor arbitrage is no longer the defining element for supply chains of the future.”

Many of the biggest players in future technology do not even have their own manufacturing, Linton pointed out. They rely on companies like Flextronics to make the items that they design — companies like Apple Inc. and Google. Microsoft Corp. was a software company when it developed the Xbox gaming system, with Flextronics as its key manufacturer.

Linton pointed out that 250 Flextronics customers have no in-house manufacturing.

“Automation is the great equalizer,” said Mike Dennison, president of Flextronics’ High Velocity Solutions business group. “Automation allows us to take these products and move them to other places in the world — maybe places like Fort Worth, Texas.”

And while cell phones and smartphones and computer tablets have existing production and supply chains, the expected growth in wearable electronics opens all new product platforms, Dennison said.

Google has gotten plenty of press for its wearable glasses, but Flextronics has been involved in other products, such as Nike Inc.’s Fuelband, which helps its users track exercise and nutrition. The company created a special production line in Asia to make the Fuelband, which houses electronic sensors inside overmolded plastic components.

During the California technology conference, Motorola’s Woodside showed off an electronic identification system developed by MC10 Inc. of Cambridge, Mass., printed on a flexible film that can be applied to the skin. Technology like that, Dennison pointed out, simply cannot be made without automation.

“The human hand won’t be able to make the parts of the future,” he said. “We need technology to make those products in the way they’re being created.”

The deal to supply Google — which bought Motorola Mobility Holdings in 2011 — makes business sense in terms of pure dollars in sales, but it means even more for creating a new potential business future.

“If Motorola came to us alone last May and asked us to take over operations for its hand set [factories] in Brazil and China, we would have had zero interest in that,” McNamara said. “But Google has content, and it has software, and it has capability, and it has innovation. It has $100 billion and it has desire. We don’t know where that market is going, but there’s a whole infrastructure of things that are being created. Google is different than a standalone Motorola.

“That’s an ecosystem we need to be in. It can move into a lot of wearables, and we think a lot of that is going to happen in Silicon Valley. It’s a new product category that we need to be in.”