FORT WORTH, Texas - 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 (GOOG) had explained its surprising decision by saying the plant's location in Texas 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, 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 (FLEX) 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 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 currently 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.
Google bought cellphone pioneer Motorola for $12.4 billion in 2012. Originally retailing the Moto X for $600, amid flagging sales, Google dropped the price to $399. Still, only a fraction of the units were sold compared to the Apple (AAPL) iPhone in the first quarter of 2014. 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, which it has retained, and less for 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.