Motorola Mobility will be shutting down its factory in Fort Worth, Texas by the end of the year, in advance of Lenovo's purchase of the unit from Google.
The factory, which assembles Motorola's flagship Moto X Android phone and only opened in May 2013, will be closed down due to weak sales by Motorola and high manufacturing costs.
The Fort Worth factory was established by Motorola almost specifically for the manufacturing of Moto X, which was supposed to create a new niche for Android-based phones. The phone didn't focus on high-end specifications and horsepower, but rather on fun features and ease-of-use. Motorola's Moto Maker also offered personalization for all customers, allowing them to create the perfect device according to their needs.
It made more sense for the company to have a factory in the United States to have faster response times to the customized orders for Moto X, despite common knowledge that operating a factory in the country is too expensive.
From a peak of 3,800 employees in late 2013, Motorola's Fort Worth factory now only employs 700 workers.
"What we found was that the North American market was exceptionally tough," said Motorola President Rick Osterloh in an interview.
Only 900,000 units of the Moto X smartphone were sold globally in the first quarter, according to market researcher Strategy Analytics. It first had a selling price of $600, which has since been reduced to $399.
"[Google's shutdown] suggests that the experience of offering customized phones [in the U.S.] was a failure," analyst for Current Analysis Avi Greengart said.
The Moto X will continue to be manufactured, but in Brazil and China among other locations. Motorola will look to focus on its success on its other cheaper mobile handsets, such as the Moto G which sold three million units in the first quarter.
"Manufacturing or assembling smartphones in the U.S. was always going to end in tears for Motorola," said Neil Mawston, an analyst for Strategy Analytics. "The U.S. is well-positioned to design smartphones, as Apple does successfully, but manufacturing them is a whole different ballgame."
Google sold Motorola to Lenovo for only $2.9 billion early this year, which came as a shock as Google acquired Motorola less than two years ago for $12.5 billion.
The sale, however, is mostly for the hardware business of Motorola and does not include everything related to the company. Google will be keeping much of the patents of Motorola, and will be licensing 2,000 patents to Lenovo.