Motorola unveils Fort Worth-made Moto X phone

Posted Thursday, Aug. 01, 2013  comments  Print Reprints
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With its first smartphone designed completely in-house, Google is demonstrating one of the benefits of moving production from Asia to the U.S.: It’s letting buyers customize phones to give them their own style.

Workers at the factory in Fort Worth assemble the custom phone and Google ships it to the buyer’s door within four days. The building at 5650 Alliance Gateway Freeway was once occupied by the cellphone maker Nokia and is owned by Hillwood Properties, a Perot family concern.

The Moto X is going on sale in about a month at all four national wireless carriers — Verizon, AT&T, Sprint and T-Mobile — starting at $199, Motorola announced at an event Thursday in New York.

Initially, only AT&T will offer the customization option, but Google said it hopes to make it available across all carriers soon. The company will offer 18 different back covers ranging in color from “spearmint” to “cabernet,” a choice of black or white fronts and seven different metallic accents for details like the volume button. That makes for 252 possible style variations of the phone.

In the fall, Google plans to offer four variants of wood for the back cover.

The Moto X is the first smartphone to be assembled in the U.S. Even though the concept of the smartphone was pioneered here and many phones have been designed in the U.S., the vast majority of phones are assembled in Asia.

With labor costs rising in China, some electronics manufacturers are looking to move manufacturing back to the U.S. Apple is moving production of its Mac Pro desktop computers to the U.S. this year.

The Fort Worth factory will let Google stamp the phone as “Made in the U.S.,” but 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. For instance, research firm iSuppli estimates that the components of Samsung’s latest flagship phone, the Galaxy S4, cost $229, while the assembly costs $8.

Google sees other value in a U.S. factory.

“Over time, by having the engineers closer to the factory floor, we’ll be able to innovate faster and develop products that actually are quite interesting down the road,” said Dennis Woodside, head of Google’s Motorola division.

The factory is owned and run by Flextronics International Ltd., a Singapore-based contract electronics manufacturer. It’s set to employ 2,000 people by late summer and, significantly, neither company has asked for any tax concessions from Fort Worth or Texas.

Google bought cellphone pioneer Motorola Mobility for $12.4 billion last year. While it launched some phones last year after the acquisition, those were designed while Motorola was still independent. The Moto X is the first phone that “gives you some indication of how Google is thinking of hardware,” Woodside said in an interview.

The phone looks much like other smartphones, with a 4.7-inch touch screen. It comes with a no-frills implementation of Google’s Android operating system, a contrast to recent phones from Samsung and HTC, which put their own stamp on the software with various add-ons.

The most unusual feature of the Moto X, apart from the customization option, is that it’s always listening for its owner’s voice.

When it hears the phrase, “Ok, Google Now …” followed by a command like “call Bob,” it will wake up from standby and execute the command — provided it understands it. Most smartphones offer voice control, but it’s usually activated by pressing a button.

Rick Osterloh, the head of product management at Motorola, said the Moto X has a special chip devoted to listening, which means it doesn’t have the drain the battery by keeping the main processor running all the time. It should be able to pick up the owner’s voice even in the noise of a car, he said.

Google is backing the launch with a big marketing campaign, including TV ads. The Moto X represents its best chance this year to make back some of the money it spent on buying Motorola, and the $1.7 billion the division has accumulated in operating losses since the acquisition.

Motorola has become marginalized in the global smartphone market, taking just 1 percent of recent sales, according to research firm IDC. Google has slashed Motorola’s workforce to 4,600 people, down from 20,300 last year.

The acquisition was motivated mainly by Google’s desire to own Motorola’s patent portfolio, which provides it with ammunition to defend fellow makers of Android phones from Apple’s and Microsoft’s patent claims. Motorola’s patents haven’t proved very useful so far, and the division puts Google in the uncomfortable position of competing with other companies that make Android phones.

Analysts see another value in Motorola: It gives Google a toehold in smartphones, acting as insurance against the possibility that Samsung, the dominant maker of Android phones, could jump ship to another operating system or create its own version of Android.

The Fort Worth facility most recently housed Q-Edge, a subsidiary of Taiwan’s Foxconn, which had been in the building since 2009. It was built in 1995 as a manufacturing site for Nokia. But the Finnish company, which employed 3,800 people in Tarrant County at one point, shifted cellphone manufacturing to Mexico and Asia.

The stakes are big for Google, and not only because of the high price that it paid for Motorola. Google is enormously profitable, but its growth is slowing because of lagging ad sales. Finding success with the new phone could lead to a new source of revenue and a way to get more users to view the company’s ads.

The company has been aggressive in absorbing Motorola. It put a former top executive, Dennis Woodside, in charge of Motorola, laid off thousands of Motorola workers and formed a new team with many employees recruited from its fiercest competitors, including Apple, Samsung and Amazon. A major marketing effort is expected for the Moto X.

“I think we’ve created an awesome company,” said Iqbal Arshad, Motorola’s senior vice president of global product development. “And Moto X represents who we are.”

Still, as other device makers have learned, it takes more than snazzy features to gain traction in the handset business. Samsung and Apple dominate the market, and some Asian manufacturers like Huawei and ZTE are selling low-cost smartphones and quickly gaining ground in economically disadvantaged markets.

Tero Kuittinen, a telecom analyst at Alekstra, a mobile diagnostics firm, said it was bad timing for Google to be competing in the high end of the smartphone market.

The smartphone business is still expanding — in the second quarter this year, it grew 52 percent compared with last year, according to the research firm IDC. But most of that growth is coming from manufacturers offering cheap smartphones in emerging markets, he said.

Chetan Sharma, an independent telecom analyst who does consulting for carriers, said it was unlikely that customers would flock to the Moto X. Plenty of people are chained to family plans and won’t be able to upgrade to a new phone yet.

“That leaves only a sliver of consumers who are up for grabbing a new phone,” he said.

But Motorola executives say Moto X is just the beginning.

The company plans to offer a broad portfolio of products. Moto X is a high-end phone, but the company will introduce a lower-cost smartphone later this year, said Rick Osterloh, the company’s senior vice president of product management.

Motorola may also contribute to Google’s efforts in making wearable computers like Google Glass, or eventually a smartwatch. Arshad said that the company’s X8 computing system was part of the company’s long-term goal to make mobile devices smarter and fit in the next generation of mobile devices.

“You could easily see the same technology we have here applicable to all sorts of different form factors in addition to wearables,” he said.

This article includes material from the The New York Times and from Star-Telegram archives.

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