Motorola to Close Texas Smartphone Factory

Google's Motorola Mobility handset unit announced Friday it will shutter its North Texas factory by the end of this year, barely a year after it opened with much fanfare as the first smartphone assembly plant in the U.S.

At the time, Google had explained its surprising decision by saying the location would enable it to fulfill customized, built-to-order devices and deliver them anywhere in the U.S. within five days.

But sales of its flagship phone, the Moto X (Review | Pictures), have been too weak and the costs of running the plant too high to keep operations going, Motorola Mobility spokesman Will Moss said. Singapore-based international contract electronics manufacturer Flextronics Ltd. operates the plant.

Even though the concept of the smartphone was pioneered in the U.S. and many phones have been designed here, the vast majority of phones are assembled in Asia. The Fort Worth factory has allowed Google to stamp the phone with "Made in the U.S.A.," although 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 Asia.

The Fort Worth factory employs about 700 workers who assemble the Moto X smartphones for the U.S. market, Moss said. He declined to comment on whether Motorola would retain the workers.

Motorola Mobility will continue to develop the Moto X in Brazil and China, where the costs for labor and shipping aren't as high.

Texas Gov. Rick Perry's office administers a pair of special state funds meant to help attract job-creating businesses to the state, but spokeswoman Lucy Nashed said the Republican governor did not distribute any money to close the Motorola Mobility deal.

Google bought cellphone pioneer Motorola for $12.4 billion in 2012. The Moto X originally sold for $600, but amid flagging sales, Google dropped the retail price to $399. Still, Google sold only a fraction of the units in the first quarter of 2014 when compared with the Apple iPhone. The average selling price globally for a smartphone in 2013 was $335, according to Massachusetts-based researcher International Data Corp.

Nonetheless, Google reported its Motorola mobile segment generated $4.4 billion in sales in 2013, a 13 percent increase over the previous year.

The announcement of the plant closure comes four months after Google said it planned to sell the Motorola Mobility smartphone business to Hong Kong-based computer maker Lenovo for $2.9 billion. The sale is expected to close by the end of the year, according to a filing with the Securities and Exchange Commission.

Moss said Lenovo's acquisition of Motorola Mobility and the closing of the factory were not related.

San Francisco-based Internet analyst Kerry Rice of Needham & Co. said Google acquired Motorola more for its patents than its production capacity.

"They wanted to give it a go as far as building in the U.S., but it was probably a stretch for them to take that on. Manufacturing is not their core competency and never has been," he said.