Keeping Austin wired (for high-tech manufacturing)

Motorola’s Fort Worth, Texas assembly plant lasted almost exactly a year. The message from the Google-owned smartphone brand was simple: The whole exercise had proven too difficult. “What we found was that the North American market was exceptionally tough,” Rick Osterloh stated simply at the time.

The writing was already on the wall when the news was announced in May 2014. Two months prior, Google agreed to sell the brand to Lenovo for a fraction of what it paid three years prior. The plant had also begun bleeding staff, down from thousands to the high triple digits before the closure was officially announced.

It certainly wasn’t for lack of ambition. The ability to label its phones “assembled in the U.S.” was a category where “Designed in California” is about as close as anyone’s come in recent decades. The Moto Maker customized color scheme, meanwhile, had Samsung’s current push for a “bespoke” everything beat by almost a decade. Ultimately, however, the sales weren’t there.

And while Motorola’s CEO Dennis Woodside enthusiastically explained, “it’s a myth that you can’t bring manufacturing here because it’s too expensive,” it quickly became clear that the company’s ambitions didn’t line up with consumer interest.

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Motorola’s Texas roots run deep. Three hours away and 40 years prior, the company planted its flag in Austin when the state capital’s metro area population hovered near 300,000 — around 15% of where it stands in 2022. But the seeds of a tech scene had been planted the late-60s with IBM, as Motorola joined a class that included names like Texas Instruments. In the 90s, Motorola began manufacturing semi-conductors in Austin, investing more than $1 billion in five plants and hiring thousands of workers.

By the turn of the millennium, development had scaled back or stopped in various locales, culminating with the spinoff of its semiconductor division and the subsequent creation of Freescale. Plants were closed under the new model and Freescale restructured, a shadow of its former self that merged into the Dutch firm, NXP.

Much of Motorola’s Austin office space has remained unoccupied for the early 21^st century. Though approvals by the City Council during the pandemic have set the wheels in motion to redevelop the space for new occupants. Rebranded Tech 3443 (a nod to the Motorola campus’ address, 3443 Ed Bluestein Blvd.), the development envisions itself catering to today’s Austin tech scene. Rather than catering to the monoliths of the past, its owners plan to rent it out to a more diverse array of mostly smaller clients.

The giants still loom in the Texas capital, however. Apple arrived in Austin in the early 90s, just as Motorola was ramping up its local chip fabrication. The two companies’ respective fortunes were, of course, dramatically different during that era. The 90s found Apple between Steve Jobs stints and attempting to combat growing Windows dominance with Macintosh clones and the Newton. In 2014, just as Motorola was shutting down its Maker plants, Apple began production of the Mac Pro in Austin. It was, perhaps, the sort of big ticket item it made more economic sense to manufacture domestically.

While that iteration of the Mac Pro itself ultimately petered out, the company again announced in 2019 that long-awaited reboot of the product would be manufactured in the same Austin facility.

“The Mac Pro is Apple’s most powerful computer ever and we’re proud to be building it in Austin. We thank the administration for their support enabling this opportunity,” Tim Cook said at the time. “We believe deeply in the power of American innovation. That’s why every Apple product is designed and engineered in the U.S., and made up of parts from 36 states, supporting 450,000 jobs with U.S. suppliers, and we’re going to continue growing here.”

With yet another redesign of the Pro expected for later this year, it’s unclear whether the company once again will produce the product in Austin. The company’s presence in the city remains strong, however. It broke ground on a new, 133-acre campus in 2019, with space for around 5,000 employees. Plans to actually get those butts in seats, however, were almost certainly delayed by the ongoing pandemic.

The company also offers other, less conventional, operations in the city, including Daisy, the iPhone disassembly robot. The system, which lives in a warehouse in the region, is part of Apple’s larger sustainability push, stripping the phones down to repurpose components.

Look most companies, Apple’s domestic manufacturing operations continue to be fairly modest. There’s likely more wiggle room in the margins for a smaller-scale, higher-cost and physically larger product like a Mac Pro versus a handset. Conventional wisdom understandably still holds that the economics are simply too difficult to crack when it comes to onshoring mass production manufacturing.

Discussions around offshoring have primarily revolved around questions of employment. Understandably so, when you hear about the 34% net job loss the sector has experienced over the past 40 years. Employee training programs — like the one recently announced by Apple — can hopefully go a ways toward helping move workers into other (hopefully higher-paying) roles. Though this is a difficult conversation we need to remain engaged with, especially as increased automation continues to make different positions obsolete. One can argue (as people do) that robots and automation don’t replace “quality” jobs currently, but even if one were to readily accept that premise, a lost job is a lost job — even if it’s not a “good” one.

Meanwhile, we have been hearing an evolution in the conversation around domestic manufacturing. In addition to continued concerns around job offshoring, a pandemic-fueled supply chain and chip crisis have spurred on conversations around increasing domestic component production. One need look no further than aerial photos of unsold cars lining racetracks in Michigan, waiting for any of the increasing number of semiconductors in today’s autos.

The highest-profile example of this is Intel’s $20 billion investment in a pair of chip production facilities outside of Columbus, Ohio. Closer to home, Samsung is having its own $17 billion moment. In 2019, the world’s largest phone maker (the U.S.’s second largest) laid off 290 workers as it shut down an Austin R&D facility. The company has, however, maintained around 3,000 jobs in the nearby chip fabrication facility.

Late last year, Samsung confirmed reports of further expansion, this time in Taylor, Texas — about 30 miles outside of Austin. The company expects to bring the location online in 2024, creating an additional 2,000 jobs for the area.

“As we add a new facility in Taylor, Samsung is laying the groundwork for another important chapter in our future,” Samsung’s Kinam Kim said in a release. “With greater manufacturing capacity, we will be able to better serve the needs of our customers and contribute to the stability of the global semiconductor supply chain.”

As with Intel’s announcement, the plant likely won’t arrive in time to address the current chip shortage, but much as experts expect additional pandemics during our lifetime, another supply chain crisis is all but guaranteed. Those issues, coupled with strained foreign relations and security concerns, all point to increasing interest in domestic manufacturing. We have the motivation, and as automation and technologies like additive manufacturing continue to advance, we certainly have the tools.

Even with these advances, economics remains a major hurdle that seems likely to relegate domestic product as a smaller piece of the overall production puzzles in spite of the security, availability and good PR that come with building here. But hey, in a world where Motorola just secured the No. 3 spot in the U.S. smartphone market below Apple and Samsung, maybe anything is possible.