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Motorola to shut down assembly plant in area

Profile image for By Emily Schmall / Associated Press
By Emily Schmall / Associated Press

Google’s Motorola Mobility handset unit has announced it will shutter its factory in southern Denton County by the end of the year, barely a year after it opened with much fanfare as the first smartphone assembly plant in the U.S.

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 Ltd. operates the plant.

The factory is in the city of Fort Worth but sits within Denton County. The announcement was a surprise to local officials.

“I, of course, feel for the employees that are going to be losing their jobs, but lucky for them they’re in Texas and there’s more job creation here in Texas than anywhere else in the nation, so I hope that bodes well for them,” County Judge Mary Horn said Friday. “Denton County has been fortunate to have a lot of new industry come in every year, so I look forward to some other business to come in here, occupy the space and get the jobs back. ...

“That seems to be the trend of Denton County, it’s a great place for businesses to come and do business.”

Denton County Commissioner Andy Eads, whose precinct includes the plant, said the county will work to attract other businesses.

“We’re sorry to see Motorola leave Denton County due to the market forces within their industry,” Eads said. “Denton County stands prepared to work with the city of Denton to attract a business to replace these jobs here.”

The local 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.

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 Denton County 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 of the phone largely lies in the chips, battery and display, most of which come from Asia.

After the closure, 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, Google dropped the price to $399 amid flagging sales.

Still, only a fraction of the units were sold compared to the Apple 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 a price of $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.

Denton Record-Chronicle staff writer Jenna Duncan contributed to this report.