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Made in America 2.0: behind Google and Apple's sudden patriotism

Made in America 2.0: behind Google and Apple's sudden patriotism


Tech giants are making innovative electronics in the US again, but why?

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American tech Tim Cook, Larry Page, Moto X, Eagle (Credit: TC Sottek)
American tech Tim Cook, Larry Page, Moto X, Eagle (Credit: TC Sottek)

The Moto X is on its way. The long-anticipated Android phone — expected to be the first truly Google-influenced product from Motorola since Google acquired the company back in 2012 — is due to be unveiled in New York City on August 1st. Already, the physical design and basically all of the phone’s technical details have leaked. But there’s one aspect of the phone that Motorola was promoting months ahead of the leaks: that it’s made in America.

"the first smartphone ever assembled domestically."

"Available this summer, every Moto X sold in the USA will be assembled in Fort Worth, Texas, making it the first smartphone ever assembled domestically," wrote Motorola spokesperson Danielle McNally in May, following comments made to similar effect by Motorola CEO Dennis Woodside at the 2013 All Things D conference. In fact, Motorola’s assembly partner for the phone, a contract manufacturing company called Flextronics, said it planned to create 2,000 new jobs in the Fort Worth area. Even leaked images of the Moto X appear to contain a Texas flag design as the default wallpaper.

But while the Moto X purports to be the first smartphone assembled in the US, Google and Motorola are hardly the only big-name brands in tech using patriotism to move product these days. Apple CEO Tim Cook made headlines last December when he announced in an interview with Bloomberg Businessweek that Apple would be making a product in the US this year. That product turned out to be the bold, new, trashcan-shaped Mac Pro, first unveiled at Apple’s Worldwide Developer Conference (WWDC) in June.

Apple's new American-made Mac Pro was unveiled at WWDC 2013.

"There’s no doubt that ‘Made in America’ advertising is effective."

In fact, Apple kicked off WWDC with an emotional animated video that ended with the phrase "designed by Apple in California," which has appeared on Apple devices for years. But the company is clearly emphasizing its home state more now than ever before. Going forward, new versions of Apple's Mac OS X operating system will take the names of places in California, beginning with the latest, 10.9 Mavericks, due to hit this fall. And "designed by Apple in California" is now the leading slogan for a new marketing campaign used in Apple video and print ads.

Not to be left out, even PC maker Lenovo is getting on the made in America bandwagon, opening a new ThinkPad manufacturing facility in North Carolina earlier this year, which it said will create over 100 new local jobs. Clearly, something is driving some of the most important companies in consumer tech to promote their affiliations with the US more today than they have in decades. But what? "There’s no doubt that ‘Made in America’ advertising is effective," said Scott Paul, president of the Alliance for American Manufacturing (AAM), a nonprofit trade group founded in 2007 to represent steelworkers and other US industrial laborers. "It’s not limited to tech gadgets."

To his point, a recent survey by the Boston Consulting Group found that 80 percent of 5,000 consumers were willing to pay more for products made in America, including electronics. The same study found Chinese consumers were also willing to pay more for American-made products. "You can certainly move a product off the shelf with that kind of advertising," Paul said. "You can also generate more support from politicians, because if you are building products and hiring workers in communities in the US, the public officials in those areas will be more invested in your outcome as well."

"I don’t think Google, Apple and Lenovo would be doing this if it weren’t in the interest of their shareholders."

While he acknowledges the political and PR benefits that tech companies can achieve by moving some production back to the US, Paul doesn’t think Apple and Google’s recent moves are just cynical marketing ploys. "I don’t think Google, Apple and Lenovo would be doing this — shifting hi-tech manufacturing back to the United States — if it weren’t in the interest of their shareholders. They have to have a reason to believe it will be successful and profitable." Paul pointed to several factors at work that are making China, currently the world's largest manufacturer, decidedly less attractive for the purposes of consumer tech assembly: rapidly rising worker wages, the fact that the Chinese workforce is declining relative to the overall size of the the population, and the slow but inevitable increase in the value of its currency.

Two other trends in the US are also making it into a more attractive electronics manufacturing hub: a depressed labor market and faltering worker wages. "You have to think that these companies [Apple, Google] are looking down the road and saying, ‘The first year we do this, we might lose money’, but five years down the road, ‘We made right call.’" Paul explained.

A graph showing manufacturing costs by country as percentages of average US manufacturing costs over time. (Credit: AlixPartners).

by 2015, manufacturing costs in China will be on par with the US, one study suggests

It’s true that for now, manufacturing in the US is more expensive than going abroad. But the situation is rapidly changing, and if current trends continue, by 2015, manufacturing costs in China will be on par with the US, according to one forecast by AlixPartners, a global business advisory firm. Still, in the nearer term, the higher manufacturing costs of American-made products often get passed on to the consumer. See Google Glass, also assembled in California, with a $1,500 price tag, and Google’s failed Nexus Q media computer which went on sale in the summer of 2012 for $299. Those were both products designed for niche audiences, meaning that Google could justify the additional manufacturing costs on its end, and higher prices for consumers. While the Mac Pro certainly falls into that category, Google’s Moto X does not. In order to find success with a mass audience, it will need to come in at a price that the average consumer can swallow.

Google's failed Nexus Q streamer, repurposed as a doorstop.

Other trade analysts don’t think Google's and Apple's new American-made products amount to much in terms of actual global economic impact. "There are no indications that these two announcements [Moto X and Mac Pro] are more than simply one-off cases," said Ron Hira, associate professor of public policy at the Rochester Institute of Technology, and the author of the 2008 book Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It. "If these were part of a real trend we’d be seeing it show up in the trade data," Hira noted. "It hasn't ... this is more PR than anything else."

"CEOs and owners have no stake in America."

Hira added that the situation with tech companies today differs substantially from back in the 1980s, the last time the "made in America" label was used to promote big US industries — namely automobiles, steel, and semiconductors. Hira said because tech companies have spent years converting their supply chains to overseas operations, predominantly in Asia, that "the CEOs and owners have no stake in America," Hira argued. "Their interests are not aligned with America’s interests."

Google Glass: Explorer Edition.

Hira said it was also an open question just how much of each device — Mac Pro and Moto X — would actually be made in the US. But there is a legal limit on that, at least: in 1997, the US Federal Trade Commission codified that for a product to be fairly advertised as "Made in America" or "Made in the USA," it must be "all or virtually all" created here. As the FTC explains: "‘All or virtually all’" means that all significant parts and processing that go into the product must be of US origin. That is, the product should contain no — or negligible — foreign content."

"The question in my mind is whether consumers will really care."

Even if Google and Apple’s quest to associate their brands with America is primarily an advertising ploy, as Hira suggests, the question remains to what extent that might help buoy product sales above a more geographically neutral advertising campaign. "The question in my mind is whether consumers will really care," said Gary Pisano, professor of business administration at Harvard Business School and the co-author of the 2012 book Producing Prosperity: Why America Needs a Manufacturing Renaissance.

"Will American consumers like Apple products more because they are ‘made in America’?" Pisano asked. "[I‘m] not sure American consumers (or any others) are looking at the back of their electronic devices to see where they are made and making a choice based on that." Pisano pointed out that for some product categories, nationalistic associations do make a difference to consumers: fashionable clothes and shoes from Italy and cars from Germany, for example. When it comes to consumer electronics, Pisano notes that Japan, and more broadly, Asia as a continent already has a fairly strong reputation for making quality products. "I would not advise companies to manufacture those kind of products in America just for the branding," he told The Verge. "I would do it to be close to the market and close to the company's design centers."

"It doesn’t matter if it was manufactured in China or on the moon, if it doesn't have the right functionality, it's not going to sell."

A photograph of the American flag planted on the moon by NASA Apollo 11 astronauts. (Credit: NASA)

Merely slapping a "made in America" label on something doesn’t guarantee it will be a hit, of course. The association didn’t stop American automakers from falling behind Japanese competitors in the 1980s. When it comes to the new tech patriotism, Apple’s own "Designed by Apple in California" video ad tested poorly in a recent consumer survey, at least compared to other previous Apple ad campaigns. And lest we forget, Google's American-made Nexus Q media computer released in 2012 has not only sold poorly, but has basically become a paperweight thanks to a recent update. Acknowledging the failure of the Nexus Q, AAM president Scott Paul told The Verge: "It doesn’t matter if it was manufactured in China or on the moon, if it doesn’t have the right functionality, it’s not going to sell."

Graphic design by T.C. Sottek.