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Manufacturing Is Coming Back. Well, Mostly

Article-Manufacturing Is Coming Back. Well, Mostly

Manufacturing Is Coming Back. Well, Mostly

I saw some pretty disturbing news recently. Motorola Mobility announced that, by the end of the year, it will close the factory it opened in May 2013 in Fort Worth, Texas, to build smartphones. The factory, a collaboration between Moto, Google, and Flextronics, opened to a huge amount of fanfare. This was the first time that smartphones were actually being built in the United States in such a large-scale fashion. This factory represented all the great manufacturing exploits that were starting to come to the US.

According to Motorola Mobility, sales of the flagship product being manufactured at the facility, the Moto X, have been weak, and the costs of running the plant were too high to keep operations going. There are roughly 700 employees at the plant, down from about 3,800 at its peak.

According to the market research company Strategy Analytics, Motorola sold 900,000 Moto X smartphones worldwide in the first quarter of this year. By comparison, Apple sold 26 million of its iPhone 5S in the same period. Ouch.

Apparently, the advantages of having a plant in the US didn't outweigh the costs. At the time of the opening, its operators said that locating the plant in the US would allow them to build customized devices and deliver them anywhere in the country within five days.

As for the phone itself, it will continue to be built -- just not here. Instead, production will move to places like Brazil and/or China, where the costs for labor and shipping aren't as high.

Here's the other side of the coin: According to a Commerce Department report, US factory orders in general rose 0.7% in April, offering what observers called a sign of a rebound in the manufacturing sector.

So which is it? My take, from all the information I've been able to glean over the past few months, is that manufacturing actually is on the way up. And it's up in the areas where we in the US are actually good. What we're not good at is manufacturing things like smartphones (obviously) and other consumer electronics: televisions, cameras, etc.

It's even been cited that some foreign companies are looking to set up manufacturing shops here. Why? It could have something to do with the quickly rising wages in places like China. At the same time, energy costs in the US remain relatively low, compared to some of the competing nations. And you certainly need lots of energy to drive a factory.

Finally, it's an old argument, but there's something to be said for having your manufacturing facility not too far from the rest of your company, specifically the design and quality assurance teams, and having your manufacturing facility not too far from your customers.

So the opinion here is that it is coming back, with just a blip on the radar from Motorola.

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