The Sense Behind 'Made in the USA'
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It’s not that long ago that the words “Made in the USA” were synonymous with quality and consistency. Yet for the last few decades, that burden of being the world's manufacturing powerhouse has shifted to China and the emerging countries that can do the job cheaper, especially in the realm of tech gadgets.
Lately though, there has been an uptick in demand for more American-made goods. A poor economy back home has fostered government “carrot and stick” policies aimed at getting American companies to make more goods in America – especially in technology. This seems like the best strategy, given that Google (NASDAQ: GOOG) and Apple (NASDAQ: AAPL) are American, born and raised, and the leaders in tech development around the world.
Motorola X stirs American excitement, international questions
Google’s American push is due to the Motorola X phone, the first all-Google phone, according to company sources. It is a phone that will take advantage of AT&T’s (NYSE: T) new color-customization software on its carrier service, which explains why Google is, for now, restricting sales and distribution to the USA. It also explains why it would therefore make the most sense to limit manufacturing to the US as well: Be closer to the customer base.
The phone has garnered worldwide attention because of its all-Google nature, but it has created buzz back home because it will be assembled, and available, only in the USA. This has caused a lot of pushback from non-American customers. Typically with phone roll-outs, a worldwide marketing campaign accompanies a worldwide release, especially in Japan and Europe, unlike a regional roll-out. Building worldwide buzz for such a phone seems like a poke in the eye to the rest of the world that has to wait longer for it. It shouldn’t be a problem once the Moto X becomes available there, which given Google’s international significance, won’t be too far in the future, but it does represent a departure from traditional Google marketing strategy.
While Google is looking to develop a new smartphone in its home market, Apple is using its domestic push to regain the confidence of the public. After being found guilty of trying to manipulate the E-book market in US District Court, a browbeating over overseas tax havens by Congress, as well as blowback over its aggressive patent lawsuit against Samsung, Apple has a lot of ground to make up in terms of winning back consumer confidence and trust.
Apple looking for a second chance
This may explain the “Designed in California” ads that Apple rolled out this summer. Although they were criticized over the dullness and effectiveness of the ads, it does help Apple try to regain its reputation as an America-born company that still cares about the American customer. Recently, that ad was buttressed by the announcement of a $100 million Mac plant going up in Texas, joining other parts manufacturers in states like Illinois, Michigan, and Kentucky. This proposal will not only help create jobs in this country, but will also allow Macs to carry a “Made in the USA” sticker, which will help Apple’s reputation significantly. More to the point, the Texas plant also represents jobs coming back from China (at least that’s how Apple is spinning it), which is a pride-inducing moment for a country that has “lost” jobs to China over the last two decades.
Make the goods where they buy them
We should remember though that this isn't just for show, it’s also sound economics. In the last quarter, 45% of Google’s revenue, and 41% of Apple’s revenue, came from America. For Apple, the American market was the only regional market that saw growth in revenue last quarter, as the rest of the world slows down. Google, meanwhile, reported $100 million in year-over-year growth thanks to Motorola Mobile, bringing last quarter’s total to nearly $1 billion in revenue.
When such a large chunk of revenue and profit comes from one country, it makes a lot of sense to set up manufacturing plants there, to be nearer to customers. That’s what initially drove companies to set up shop in China a decade ago, and with the Chinese economy cooling off, it opens up opportunity to bring back jobs and investment to a place with a stable economy that desires more products made at home.
AT&T a sleeper winner
AT&T will also benefit from this repatriation, thanks to deals with Apple as well as near exclusivity with the Motorola X. Mentioned earlier, it’s a phone designed with new AT&T technology in mind. AT&T’s 1.2 million smartphone subscribers, using 50% more data, year over year, put the company in a strong position to help Google and Apple cater to American customers in a way that can’t be done yet with international customers.
AT&T will be integral to the Motorola X, and will drive users to buy the phone, which will mean a better bottom line for AT&T and Google’s American manufacturing. Apple’s Macs have gained in revenue despite a decline in unit sales, but that makes production more profit-efficient in the USA, foretelling potential success for all three companies in their “Made in the USA” push.
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John McKenna has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!