Reshoring for fun and profit

Jan. 22, 2014

Time for an attitude adjustment in cell phone production.

I'm proud to announce that my family has just reshored our share of smartphone manufacturing. We changed to the new Moto x, which is the first smartphone to be assembled in the USA, according to ABC News' Made in America Team. We picked our new phones because they offered the features we value, but it still got me thinking.  What does all this mean to US employment numbers?

The details are sketchy, but we do know that the Texas plant building the Moto x is planning to have about 2,000 employees when they are at full strength. Motorola has never been very forthcoming with sales figures, but the industry estimates of Moto x sales for Q3 2013 are around .5 million units. If that means 2,000 employees will produce 2 million phones a year, then the US smart phone market of 125 million units is worth something like 125,000 jobs. Okay, the Moto x is early on the learning curve and expected output is almost certainly well over 2 million units per year, so we probably need to soften the phones to employees ratio. Let's round it down to 75,000 US jobs. That's just for final assembly, not all the chips and plastic parts.

This means that by blissfully accepting offshore assembly of cell phones, which use mostly US technology, we are exporting something like 75,000 jobs. Mind you this is ongoing business, too. Cell phones are here to stay, and they have replaced a huge number of jobs in the old land line companies. We've offshored a big chunk of our economy, folks.

When, in the 80s, American consumers came to the realization that we had made the same mistake with cars, we set to work as a nation reshoring auto manufacturing operations. In doing so we had a sizeable advantage that may not help us as much with cell phones. Back then we were the world's largest auto market.

The last step in producing cars takes compact materials like sheet steel and plastic and blows them up like balloons, making shipping a much larger expense. Add to that the fact that the number of options available in cars makes those same production steps, which add color and trim to the units, huge product differentiators. Grab the nearest APICS-certified inventory control person if you don't understand the impact of that change on the time and inventory required to meet US customer demand.

We aren't the largest cell phone market, but still our toe is in the door now to deliver an attitude adjustment in the telecommunications field. Motorola is ready and able to build a full range of great cell phones here in the US of A. Let's get the word out to Apple, Samsung, LG, Nokia, Huawei, ZTE, Lenovo (Remember IBM laptops?), TCL and Sony that we'd be most appreciative if they'd make our stuff closer to the market that pays their salaries and dividends.

Now, the US is only 5 or 6% of the world cell market, so some phone manufacturers won't listen. But we're 100% of the AT&T, Verizon, T-Mobil US, and a bunch of other cell carriers' markets. Perhaps they'd listen if we shared the same message with them.

And maybe, just maybe, both parties in DC might agree that someone should call Tracfone, the providers of the government-paid lifeline phones, and invite them to join the push for US-made cells. It just seems to make sense, doesn't it?

Read Stanton McGroarty's monthly column Strategic Maintenance.

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