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The Motorola Texas Plant Tour reveals that the Moto X is Google Hardware Labs “Project USA”

Moto X FeatureMotorola did a pretty good job of building hype around its Motorola Moto X phone. The launch, however, was generally considered as tepid. The Moto X is being offered in the United States only. The roll-out to the carriers was not simultaneous, and Moto Maker is initially available only on AT&T. As it turns out, Motorola really has little choice in the matter.

Motorola recently gave journalists a tour of its Texas based factory where it builds the Moto X. During the tour, Motorola CEO Dennis Woodside revealed that the facility can build 100,000 units a week. This means Motorola can build about 1.25 million Moto X smart phones per quarter. I found that volume to be surprisingly small.

About 240 million smartphones are shipped each quarter worldwide. From 2011 to 2012, Motorola shipped about 9 million smartphones per quarter. With only 1.25 million Moto X being built each quarter, this would only represent only half a percent of smartphones shipped worldwide. Moto X production also only 13% of Motorola’s average sales in a period where Motorola was unprofitable.

Google Hardware Labs Project X. Basically, even if the Moto X is wildly popular, it will not be enough to turn around Motorola’s fortunes. So why bother making it? It looks like it is Google Hardware Labs’ Project X. The hypothesis being tested is whether a decent handset with a premium price will sell well, if built in the USA. If the Moto X project is successful, you can probably expect Motorola to expand its US-based manufacturing facilities and will find a successor being manufactured in more meaningful numbers next year. I think, the entire point of the Moto X is really to test a concept. Google, has after all, tried this before with the Nexus Q.

Cheaper International Moto X. This is also the reason why, if the Moto X is released internationally, Motorola has promised a lower cost version. To be competitive worldwide, where the “made in the USA” label is less compelling, the Moto X will have to be sold for a lower price. Manufacturing the handset in China would probably take care of part of  that. But it would be a tough task to sell a US-made Moto X at one price and a China-built one for another price. To justify a lower priced worldwide version, Motorola could simply do an X7 version. Remove the Texas Instruments natural language processor and touchless control. Really, the touchless control feature is a bit less valuable where people speak different languages and with different accents. To cut cost even further, Motorola could just call it an X6 and drop both of the Texas Instruments processors, and swap the Super AMOLED display with a IPS one.

The Motorola Moto X is not likely to be a wide commercial success in the conventional sense. If it does sell in large numbers, that would composed mainly of a China built “international versions” of the Moto X. Apple is likely to sell more Apple iPhone 5S or 5C’s over their first weekend on sale, than Motorola can manufacture in a year’s time. But the Moto X is targeting a different kind of success, maybe an even more fundamental type of success: Can built in the USA sell in the USA. Short term success will be measured in the number of US jobs created. Profitability, is something to be achieved later.