More than two-thirds of the world’s population owns a smartphone, and over a billion units are sold every year, generating upwards of $400 billion in revenue. The market is overwhelmingly dominated by Apple and Samsung Electronics , and while the two companies are industry rivals, they share one key fact in common: neither country manufactures smartphones in the US.
Smartphones are notorious for their complex and multifaceted supply chains, from sourcing raw materials to manufacturing components and assembling devices. Regulations, labor costs, geopolitical dynamics, and the availability of materials have made it more convenient to manufacture abroad—Apple’s iPhone production is centered in China, while Samsung builds its devices in Vietnam.
And yet, despite these factors, one company, Purism, has been able to manufacture entirely within the US, resulting in the Librem 5 USA, the only smartphone truly made in America. The story of the Librem 5 offers insight into what it takes to manufacture domestically, and how businesses contend with long-established challenges in order to stay entirely US-made.
The Benefits of Manufacturing Domestically
Purism began manufacturing their Librem smartphone in the US at the height of the pandemic, when COVID-related delays and a global chip shortage were wreaking havoc to the electronics industry. By sourcing the majority of the phone’s parts domestically (with the exception of the chassis, which is made in China, and the WiFi card, which is made in India), Purism was able to avoid the shipping and labor disruptions that its competitors grappled with.
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For instance, Apple has struggled with pandemic-fueled supply issues as recently as November 2022, when a COVID surge impaired iPhone production at a facility in China. Meanwhile, in the early weeks of the pandemic, Samsung had to delay the launch of a new Galaxy Note due to travel restrictions preventing entry from the company’s headquarters in South Korea to production facilities in Vietnam. In addition to COVID, geopolitical conflicts have complicated traditional globalized supply chains—ongoing tensions between the US and China have introduced new obstacles to resilient supply chains in the electronics sector.
By manufacturing and assembling the Librem 5 in the US, Purism seeks to avoid getting entangled in complex international dynamics, while also saving on shipping and transportation costs.
Downsides: Increased Cost
However, these advantages also come with downsides. While the original, foreign-made Librem 5 retails at $1299, its US-made counterpart is significantly more expensive, priced at $1999. This increased price tag reflects the economic barriers to manufacturing domestically.
Today, smartphone sales are declining, dropping by over 11% in 2022 due to decreased consumer demand amid concerns about inflation and economic uncertainty. Under these conditions, it is difficult to say whether already-cautious consumers would be willing to spring for the more expensive, domestically-made model.
Understanding The Trend of Near-Shoring
The development of the Librem 5 reflects a broader trend in the electronics industry: the concept of near-shoring. For decades, globalization was successful, and offshoring remained an effective and cost-efficient manufacturing strategy. However, over the past 7-10 years, this system has faltered due to political tensions (such as the fraught relationship between the US and China), consumers’ rising concerns about the ethics and environmental impacts of current manufacturing practices, and sanctions brought about by conflicts like the Russian invasion of Ukraine. Coupled with the chip shortage and the pandemic’s delays and disruptions, these big-picture factors exposed instabilities and cracks in supply chains.
To mitigate these risks, businesses (including Purism) have turned to near-shoring and friend-shoring. By substituting traditional trade partners for those with more proximal locations or more favorable relations, businesses have adapted to the new reality of “fragmented globalization.” This practice is growing increasingly popular: a recent study revealed that 88% of U.S.-based small and medium-sized businesses plan to transition their supply chains to rely more heavily on American and Mexican suppliers in the coming year.
While near-shoring is one key step to alleviating shortages and delays, it remains crucial that businesses base their supply chain decisions on the most accurate real-time insights.
Building Stronger Supply Chains in 2023
With near-shoring becoming more prevalent and more organizations moving aspects of their supply chain into the U.S., it’s quite possible that devices like the Librem 5 could become the rule, rather than the exception.
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