Moto X Teardown Reveals that Made in USA Costs $5 Extra

[Marcus Yam]

The cost of doing business in the United States is just a handful of extra dollars.

Moto X Teardown Reveals that Made in USA Costs $5 Extra : Read more

 

[kawininjazx]

It cost $221 to make and costs hundreds more, just like iPhones. How come google can sell the Nexus 7 with such a low profit margin and phones are 2-3x profit?

 

[xtec]

Five dollars isn't that much and would not keep any one from buying this phone..except it will be triple that or more at retail. The middle men have to make their 300 to 400%.
And by the way it wont cost Motorola any thing, unless they don't sell, because its all passed on to the customer.

 

[descalada]

It cost $221 to make and costs hundreds more, just like iPhones. How come google can sell the Nexus 7 with such a low profit margin and phones are 2-3x profit?

Remember this is just the manufacturing cost. This doesn't take into account the cost of developing the phone's hardware, software integration, and the countless testing cycles to get to the finished product. There is a lot of investment and overhead just to get to this point. Moto and all other handset manufacturers need to recoup the costs of this investment. Think of it like movies. The cost of a single DVD is 20 cents or less, but you pay $20 and receive a movie that may cost hundreds of millions of dollars to make.

 

[-Fran-]

Remember this is just the manufacturing cost. This doesn't take into account the cost of developing the phone's hardware, software integration, and the countless testing cycles to get to the finished product. There is a lot of investment and overhead just to get to this point. Moto and all other handset manufacturers need to recoup the costs of this investment. Think of it like movies. The cost of a single DVD is 20 cents or less, but you pay $20 and receive a movie that may cost hundreds of millions of dollars to make.

Well, Steve Jobs said it in its time and made clear what the challenges were to bring back the "production" part to the US of A.

The first and more important part is workers willing to move in no time (overnight mostly) to keep manufacturing levels up to speed. And the technological part for facilities was the second issue he identified: they had factories ready for production in like 3 days, was it? China has been advancing in both points faster than the US of A, but it doesn't mean it will last forever. Besides, that's leaving the point of "21st century slavery" at bay.

In short, the "cost" itself doesn't reflect if these issues are solved/overcome or not, but if Motorola is willing to do so, I'm pretty sure more will join when more plants are built and can compete with China (or Malaysia) in price and productivity.

Cheers!

 

[yhikum]

The cost overhead is only a factor in investment.

Justifying that you can get 300% profit out of it is what is troublesome.
By this logic, technology benefit is secondary to profit, which is clearly goal of any investment.

Yet, when we assume that future offers us ease of work or technological benefit, we forget that it is driven by profit. More correctly said, would be along lines of: profit does not drive technology, but rather produces secondary effect output which we consider benefit.

Same can be observed in any company currently. So why claim that is positive development? Is this only acceptable way of dealing in current commerce? Answer yes would be considered without further thinking.

 

[Mathos]

Yeah, so it costs $5 more to assemble in the US.. See, but how much are they saving on not having to pay the importation taxes, and overseas shipping?

 

[the1kingbob]

This is a little bit misleading, as other comments have noted. There is a lot of overhead with this move. People pick over sea slaves because there are companies that take on the challenge of figuring out how to build the assembly factory. The money paid to them is used for this setup and maintenance while very little is passed onto the workers. Hell, even Apples USA machines are assembled in factories owned by Foxconn. Also as for the price, I am pretty the price is still high because this is a Motorola phone. All nexus devices drive very low margins; yesterday the nexus 4 dropped 100 bucks. It is now cheaper than a new nexus 7; that is pretty damn impressive.

 

[soo-nah-mee]

I would gladly and voluntarily pay 100% of the $5 premium for the opportunity to own an American made electronic device.

 

[segio526]

Yeah, so it costs $5 more to assemble in the US.. See, but how much are they saving on not having to pay the importation taxes, and overseas shipping?

Actually, I think that's all part of the calculation

 

[inherendo]

All of you guys stating you want to pay what the phone costs, show me where you can buy a S4 or iphone for BoM.

The figure in the article does not include anything besides the cost of the parts.

 

[unksol]

All of you guys stating you want to pay what the phone costs, show me where you can buy a S4 or iphone for BoM.

The figure in the article does not include anything besides the cost of the parts.

What part of MANUFACTURING cost did you not understand? The BoM was $209 manufacturing was $12.

Should people pay what it costs in parts and assembly? No. That doesn't include R&D and software and sales and support and marketing and all those peoples salary. But its irrelevant. Every company has those and it has nothing to do with this article.

The point is it supposedly costs $5 bucks more to make it here. Even with their customizations. And if that's true other companies could do it here if they actually wanted should Samsung? Not really. Its not their country. Should apple have a long time ago? Definitely.

 

[Grandmastersexsay]

Yeah, so it costs $5 more to assemble in the US.. See, but how much are they saving on not having to pay the importation taxes, and overseas shipping?

Well a 40'x8'x8'6" container with a volume 2720 cubic feet costs about $2500 to ship from China to the Unites States. That equates to less than $1 per cubic foot. I will make up a cell phone package of 6"x4"x2". At that size you could fit 36 phones into one cubic foot. So we are looking at under 3 cents per phone to ship from China. Specifically for a $2500 40' container, it would cost 2.5531 cents. So if you find there is a variance in the containers shipping rate from what I mentioned, we could use the general rule that for every $1000 a 40' container costs to ship, a 6"x4"x2" phone package costs 1 cent to ship.


For all those people saying that $5 extra isn't very much, I hope you realize that means it costs more than 70% more to manufacture this phone in America. That is astronomical and completely ridiculous. Don't think that difference is due to lower wages in China either. The majority of that difference is due to the EPA, OSHA, the highest corporate tax rate ever in the history of the world, ect. ect.

 

[Narcissistic_Martyr]

$5/unit doesn't sound like a lot but that $5/unit is exactly why Apple won't bring iPhone manufacturing to the US.

$5*48 million iPhones sold annually= $240 million annually or about a quarter/share (or a 9% decrease in dividend size) and the larger shareholders aren't going to put up with that.

 

[thesuperguy]

Why couldn't they just increase the price by 5 dollars lol - or hell even 10

 

[Gulli]

"Remember this is just the manufacturing cost. This doesn't take into account the cost of developing the phone's hardware, software integration, and the countless testing cycles to get to the finished product. There is a lot of investment and overhead just to get to this point. Moto and all other handset manufacturers need to recoup the costs of this investment. Think of it like movies. The cost of a single DVD is 20 cents or less, but you pay $20 and receive a movie that may cost hundreds of millions of dollars to make."

Development is usually still done in rich countries, or by above average paid people in middle income countries, so quite simply put it doesn't factor into the cost difference.

I'm not really surprised it costs only $5 more to make a phone in the US, after all, they save a lot of shipping costs and other costs stay the same, plus the US is a low wage country among rich countries (Europeans, Australians and Canadians get better pay and better benefits).

The only caveat is that of course some parts of the production chain still involve low wage labor, for example in the manufacturing of some parts and the mining/recycling of the raw materials.

 

[TechnoD]

@Mathos
They still have to pay overseas shipping and importation taxes, just now from a different location.

 

[house70]

.... And if that's true other companies could do it here if they actually wanted should Samsung? Not really. Its not their country. Should apple have a long time ago? Definitely.

Actually, Samsung is building a fab factory in Texas. Apple... not so much. Go figure.

 

[Nilo BP]

The level of economic illiteracy isn't very surprising, but couldn't people at least bother to use some basic proportions? The cost of ASSEMBLY is 50% higher in the US. Imagine if the PARTS were built there, too!

And just for the record, trade is the lifeblood of any advanced economy. If you're so hell-bent on self-sufficiency, why not set out into the wilderness and build your own civilization from sticks and stones and upwards? The logic applies to international trade as well. Or it would, if most people weren't still tribals at heart.

 

[Nilo BP]

The level of economic illiteracy isn't very surprising, but couldn't people at least bother to use some basic proportions? The cost of ASSEMBLY is 50% higher in the US. Imagine if the PARTS were built there, too!

And just for the record, trade is the lifeblood of any advanced economy. If you're so hell-bent on self-sufficiency, why not set out into the wilderness and build your own civilization from sticks and stones and upwards? The logic applies to international trade as well. Or it would, if most people weren't still tribals at heart.

 

[Nilo BP]

Ops. Sorry.

 

[pocketdrummer]

Remember this is just the manufacturing cost. This doesn't take into account the cost of developing the phone's hardware, software integration, and the countless testing cycles to get to the finished product. There is a lot of investment and overhead just to get to this point. Moto and all other handset manufacturers need to recoup the costs of this investment. Think of it like movies. The cost of a single DVD is 20 cents or less, but you pay $20 and receive a movie that may cost hundreds of millions of dollars to make.

Well, Steve Jobs said it in its time and made clear what the challenges were to bring back the "production" part to the US of A.

The first and more important part is workers willing to move in no time (overnight mostly) to keep manufacturing levels up to speed. And the technological part for facilities was the second issue he identified: they had factories ready for production in like 3 days, was it? China has been advancing in both points faster than the US of A, but it doesn't mean it will last forever. Besides, that's leaving the point of "21st century slavery" at bay.

In short, the "cost" itself doesn't reflect if these issues are solved/overcome or not, but if Motorola is willing to do so, I'm pretty sure more will join when more plants are built and can compete with China (or Malaysia) in price and productivity.

Cheers!

"The first and more important part is workers willing to move in no time (overnight mostly) to keep manufacturing levels up to speed."
Why the hell would anyone have to move? You hire local workers...

$5 isn't bad at all, and I would GLADLY pay an extra $5 to have it built here. Make the prices $205 and $255 respectively and nobody will complain. Costs covered.

 

[growup]

Only reason why we dont have jobs in the U.S. is because everyone in the U.S. bitches about wages. OMFG I have a degree I should make 110K year. STFU...only way to win this war on jobs is to get our jobs back by working the same price that others work overseas.

 

[tului]

$5/unit doesn't sound like a lot but that $5/unit is exactly why Apple won't bring iPhone manufacturing to the US.

$5*48 million iPhones sold annually= $240 million annually or about a quarter/share (or a 9% decrease in dividend size) and the larger shareholders aren't going to put up with that.

Shame our government cares more about shareholders than average citizens. It could erect tariffs to make it cheaper to do here, but they don't.

 

[soo-nah-mee]

I would gladly and voluntarily pay 100% of the $5 premium for the opportunity to own an American made electronic device.