CNBC Marathon explores how the cellphone market is transforming.

Made in China. It’s a common phrase known by many. Cellphones, TV screens and game consoles are just some of the millions of electronics manufactured and imported from China to the U.S. daily. China has controlled the smartphone manufacturing market for years. While some industries, like the semiconductor industry and the EV battery market, are scrambling to build new factories across the U.S., tech giants like Apple and Google are not making the same effort to do that. CNBC explores why tech giants produce phones abroad and whether it makes sense to move production to America.

Dumb phones, once considered outdated, are still prevalent around the world, making up about a quarter of mobile phones actively in use. While affordability in developing countries is a significant reason for their continued use, there could be an unexpected but potential rise in use among younger generations conscientious about the potential smart phones could have on mental health. While Nokia and Motorola are still some of the biggest dumb phone makers in the world, Punkt. and Light are two start-ups betting on the resurgence in popularity.

For years, BlackBerry was the most popular smartphone brand in the U.S. After failing to adjust to the rapidly-changing industry and falling to competitors like Apple and Google, the company pivoted to an entirely new direction. Now, it’s focused solely on software and cybersecurity — trying to leave the iconic cellphones in the past. CNBC visited BlackBerry's Autonomous Vehicle Innovation Center and interviewed CEO John Chen to see what the company is up to now.

Chapters: 
00:00 — Introduction 
00:40 — Why The U.S. Fell Behind In Phone Manufacturing (Published November 2022)
17:58 — The Rise Of Dumb Phones (Published March 2023)
35:16 — What Happened To BlackBerry? (Published November 2022)

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How The Cellphone Market Is Transforming | CNBC Marathon

The consumer electronics world was really never here.

So it's not a matter of bringing it back.

In light of supply chain issues highlighted by the COVID-19 pandemic, a push to bring manufacturing home to America returned.

Blackberry stock peaked at nearly $150 in 2008.

Now it's sitting pretty at around 5 bucks.

85 percent of Americans have a smartphone and that percentage has grown every year since their inception.

But some think the dumb phone industry will grow as well.

It's a common phrase we see on everything from clothes to electronics.

And while that's today's reality, it has not always been the case.

The United States used to be a global leader in manufacturing, but in 2010, China passed the US in manufacturing output and has seen massive growth ever since, going from 3.5% in 1990 to 30.5% in 2021, with the U.S.

Now ranking behind China at 16.8% of global manufacturing output.

However, in light of supply chain issues highlighted by the COVID-19 pandemic, a push to bring manufacturing home to America returned.

Revitalization of American manufacturing.

While some industries like the semiconductor industry and the battery market are scrambling to build new factories across the U.S., tech giants are not making the same effort to do that.

CNBC wanted to find out why tech giants aren't making smartphones in America.

We visited 1 company, which is manufacturing a phone in the U.S., to explore what it would take for more phones to be made in the States.

The history of manufacturing technology in the U.S.

Dates back decades, way before smartphones even existed.

The whole concept of manufacturing in the U.S.

Was very strong through about the mid-1960s.

We fundamentally gave manufacturing away in the 60s and 70s.

And in that time frame, Japan expanded, China expanded, a lot of the other Asian countries expanded.

Today, the supply chain for smartphone manufacturing lives outside of the U.S.

And big tech companies are heavily involved.

Apple and Alphabet hire and send thousands of employees abroad to oversee manufacturing.

Prior to COVID, it was very common to send engineers like myself, maybe

engineers at a time to the factory to support prototyping builds, to do that learning and finding and fixing of issues and be in the right place at the right time.

In fact, in 2019, Apple was United Airlines' biggest customer, buying 50 business class seats from San Francisco to Shanghai daily, accounting for $150 million in annual revenue for United.

This is 1 reason Anna Katrina Shedletsky founded Instrumental.

The startup aims to reduce waste in the manufacturing process by making it easier to oversee production remotely.

I started Instrumental with my co-founder Sam because we felt like data provided an opportunity

to be leveraged to solve these problems much faster.

And maybe I wouldn't have to, as an engineer, go to China every several weeks for many weeks at a time to find these issues and try to be in the right place at the right time.

As new technologies like instrumental emerge to make it easier to manufacture abroad, there isn't much incentive for companies to move factories to America.

Apple has moved some iPhone production to India amidst COVID lockdowns in China and rising tensions between Washington and Beijing.

1 estimate predicts 1 out of 4 iPhones will be made in India by 2025.

So why not move some production to the U.S.

Back in 2012, Apple CEO Tim Cook made this point.

Then in 2017, he followed up telling Fortune it's an issue of highly skilled labor.

There's a confusion about China that, and let me at least give you my opinion.

The popular conception is that companies come to China because of low labor cost.

I'm not sure what part of China they go to, but the truth is China stopped being the low labor cost country many years ago.

And that is not the reason to come to China from a supply point of view.

The reason is because of the skill and the quantity of skill in 1 location and the type of skill it is.

With a population of 1.4 billion, China does have the most undergrads getting science and engineering degrees globally.

But in reality, there is still a difference in the cost of labor.

And while China has no set national minimum wage, in the city of Zhengzhou, where Foxconn's largest iPhone plant is located, the hourly minimum wage is 19.6 yuan, or less than

We don't know exactly how much the factory workers are making.

But in the early days, they had a wage that was much better than they were making out in the fields.

Now, as the demand for their products and their talent has, Because they've gotten more experience, their wages have gone up even more.

And many of the workers who are in the factories are moving into what we would call their version of what we call middle class now.

Foxconn did not respond to a request for a comment and Apple did not provide a comment on iPhone worker wages either.

I would say that there is still a cost of labor concern for a building here in the U.S.

But I do agree with what Tim Cook is saying, that there is also an expertise that makes China very attractive.

There is a lot of skill and a lot of local supply chain for where all the parts are going to come from to build such a complex product.

That makes it a very appealing place to build.

Apple said in a statement to CNBC that all of our products are designed and engineered here, and they all include components manufactured in America.

For example, iPhone glass is made in Kentucky and lasers that enable Face ID are built in the U.S.

It also said just last year, we announced $430 billion in new investments across the country, including our work with more than 9000 suppliers across all 50 states.

In 2012, Google purchased Motorola for $12.5 billion.

A year later, it opened the U.S.'s only smartphone manufacturing plant in Fort Worth, Texas, with plans to make the Moto X.

The factory was part of Motorola's plan to build an American-made, low-cost smartphone.

But about a year after it opened, the plant shut down, citing high domestic operating costs and low consumer demand.

Google sold Motorola to Lenovo for a multi-billion dollar loss.

Failure shows that the cost of labor and the lack of skill in the U.S.

Is why manufacturing in the country is not cost effective.

Alan Young, a former Foxconn executive and author of the book Flying Eagle, brought up this point during a visit to the White House in 2017 with then chairman of Foxconn, Terry Goh.

Foxconn is Apple's largest supplier and the world's largest electronic manufacturer.

The core skills and the capabilities of making phones, manufacturing electronics have moved to Asia and for it to come back to U.S., it would be difficult, though not impossible, but it would take a while.

However, Purism is 1 American company that has been able to do what many are calling the impossible.

we're going to do manufacturing for the Lieberman 5 USA.

We're going to do the printed circuit board to printed circuit board assembly.

We started the company in 2014 doing manufacturing in the United States of America.

Purism's a hardware manufacturer as well as software.

So we do laptops, mini PCs, and also a phone that run the same operating system that we authored.

Purism offers a range of consumer electronics, including the Libram 5 USA phone, which costs $2, 000.

It's the only smartphone in the world with the Made in USA stamp.

The FTC actually has a very strict definition of what Made in USA is or assembled in the USA.

The Libram 5 USA is manufactured in the United States of America.

We actually have a label and a sticker we put on there, Made in USA Electronics, so that we're actually showcasing that we are indeed qualified by the FTC definition of Made in USA for a full phone.

The phone is assembled here in its Carlsbad, California, factory.

Pierce resources all components of the Librem 5 USA phone domestically, with the exception of the chassis and the Wi-Fi card.

Overall, what we're looking at is all the electronics are manufactured at our facility.

The chassis, the specific components are called integrated circuits.

Those can come from outside of the country.

As 1 example, our NXP CPU is manufactured in South Korea and then we import that specific chip and then we use that on our board that we do all the manufacturing.

But the company also sells the Libram 5 phone, which is mass produced in China.

Weaver says he hopes to expand the line of products the company makes in the U.S.

And it's going to even spill over to doing other products in the United States as well, like our laptop and many PCs and potentially even servers.

There is also potential for us to even get into chip manufacturing.

Weaver said the company is profitable, but we asked how this is possible with the higher labor costs for the U.S.

Actual physical labor costs are clearly more than in China.

We're able to sell at a price point where we don't have to ram our costs so far down.

So That allows us to pay people really well and take care of the employees and have secure supply chain and everything else.

Purism initially started through a crowdfunding initiative.

Now the company says it's sold tens of thousands of phones.

Overall, we're a multimillion dollar company.

We've seen growth triple digits a year over year since we started.

Our margins are healthy, which allows us to continue to pay people really well and also allows us to scale up the business.

Pearson said almost 1 third of its revenue comes from the American-made Labrum 5 USA model.

But Weaver said labor hasn't been an issue for the company.

The key piece that you're looking at is there's actually not a lot of physical labor that goes into producing a phone.

It's more mechanical labor, the actual machines.

And so machine versus machine, it's equal to do U.S.

Manufacturing on the same machine in the U.S.

So in the end, you're looking at a number of U.S.

Jobs that can be that assembly line operator final fulfillment.

But machine versus machine is still equal.

Anytime we post a job at all, we're going to get 100 applicants.

So from line operators to assembly workers, right, we're talking well over $10 over minimum wage for a lot of those positions.

However, not everyone agrees this business model will be successful in the States.

Baizu Chen, a professor at the USC Marshall School of Business, says these jobs are not coming back.

That rows and rows of workers sit in front of a desk, assemble the small forms.

These type of jobs are not coming back to the US.

These, I'm talking about the labor intensive manufacturing job.

There's actually lots of manufacturing jobs that are being made here in the US.

They are data analysis jobs, engineering jobs.

I definitely think there are compelling cases where you can build highly complex products here in the U.S.

Smaller companies are often deciding to build locally.

So what will it take to bring phone manufacturing to the US?

Not only you will need to rebuild the human infrastructure, you also need the components to be made nearby, somewhere in the ecosystem needs to be there.

America doesn't have this ecosystem here, because we have not been manufacturing phones for years.

And so the supply chain doesn't exist here in the US.

They are in Asia, in China, in Vietnam, in other countries.

So to rebuild those things will take time and take a cost.

But in light of recent support from the U.S.

Government to transform the American manufacturing ecosystem, the U.S.

Is taking steps to reassure some manufacturing jobs.

In August 2022, President Biden signed the Chips and Science Act.

The bipartisan bill includes $52 billion to U.S.-based companies to produce semiconductors, with $39 billion in manufacturing incentives.

America finally is making policy at the federal, state and local level to level the playing field.

Beforehand, it was just difficult because regulations and red tapes were blandy, taxes were high and costs was very high.

I would say it would be very challenging to build a complex electronic device like a phone here in the U.S.

It absolutely can be profitable to build products here in the U.S., But it's got to be the right product and have the right technology support around that product.

In 2017, the White House announced Foxconn's plan to open a massive LCD screen manufacturing facility in Wisconsin.

I led the project Flying Eagle, which was slated to invest up to $10 billion and creating 13, 000 jobs in the state of Wisconsin.

But Foxconn has massively scaled back on that promise.

In 2021, the company anticipated creating less than 1, 500 of the initial 13, 000 jobs promised and cut its investments to 672 million.

Foxconn bit off more than it could chew at that particular stage of their history.

Dealing with everything from the regulatory side, the environmental side, the actual buildings of the facilities, and then even possibly getting the right kind of people needed to do it, that was just not reality in the short time frame they promised.

2 key elements that actually affect the project were the market condition and also the investment climate.

In our case, for LCD manufacturing, the prices dropped and got cut by half.

And if you ask manufacturers, Would they still build a project or build a factory if the end products now sold 50 percent off?

I think they have to pause and really take a long, hard look strategically to do that.

But if the world's largest electronic manufacturer could succeed in Wisconsin with LCD screens And if Motorola failed at making phones in the country after only a year, it seems highly unlikely that we will see any other attempts to make smartphones in the U.S.

I can't comment on whether Apple asked Foxconn to manufacture iPhone in the United States.

But I'm sure when the clients of Foxconn ask the company to consider manufacturing a particular product in the United States, the company will be ready.

As to why it's necessary to build phones in the U.S., Purism's President Kyle Rankin says it's largely due to security concerns and data protection.

So we treat it like a radioactive substance where we collect As little of it as humanly possible.

Manufacturing things in the USA avoids risk from some other government or overseas or something tampering with it.

Every extra link you add to the supply chain is an extra opportunity for someone to inject themselves in that supply chain and tamper with things.

If China continues to be a security threat, more and more of the U.S.

Companies and the international companies are going to move manufacturing outside of China.

But Professor Chen says it's really not necessary.

We eat strawberry, we eat tomatoes, but we don't grow tomatoes, we don't grow strawberry.

We can consume iPhone for any smartphone without manufacturing the smartphone.

These phones can be manufactured in Vietnam, in China, in different other countries.

Regardless of where it happens, the need for manufacturing foams is only going to grow.

Other companies, they continue to fall back on it's just too hard to do in the United States as almost a talking point as opposed to actually looking into how it would be able to get done.

It can clearly get done and there's a huge market opportunity.

And it's just cheaper for those companies to offshore those jobs and continue to import from other countries.

There is a reason why those companies manufacture products in China.

By combining the labor costs and supply chain and productivity, China is still the most efficient place to produce.

Whether a phone or TV or computer should be made in the U.S., it's going to be up to the companies, meaning the supply chain, including Foxconn and the clients to decide.

But ultimately, it's the end-use customers who's gonna decide.

And the customer is gonna decide when to go to the shop or go online and make the purchase and make the decision with their credit cards.

While it might seem like dumb phones are a product of the past, they've actually remained prevalent around the world and still make up about a quarter of phones actively being used.

And yes, this is in large part due to their affordability in developing countries, but it's also becoming a movement among younger generations.

So it's been an official week on this guy, the crappy, dumb phone.

And I'm never going back to a smartphone.

We're going to be talking about my dumb phone.

Today, we're going to talk about the Light Phone 2.

It's been 3 years since I've had this device.

I had been thinking about getting a dumb phone or a flip phone for a while, But then I kind of involuntarily adopted 1.

Despite this, smartphones are still king.

Even in developing nations where flip phones are still widely used, smartphone usage is growing.

Developing countries are definitely some of the places where Nokia has, not just as a brand, but also with both feature phones and other smartphones, has a very, very strong, strong presence.

Worldwide, the feature phone market is expected to decrease by about 10 percent over the next 5 or so years, largely attributed to developing countries making the switch to smartphones.

And older generations refusing to use smartphones could be phasing out as there is a 48 percent increase in smartphone ownership among those 65 and up from 2012 to 2021.

But the amount of dumb phones being used by young people in western countries is growing.

CNBC wanted to explore what the dumb phone trend is all about and see if it can compete with the massive smartphone industry.

Within the dumb phone market, there are essentially 2 avenues most consumers take.

1 being a classic flip or slide phone similar to what was commonly used in the early and mid-aughts, like a Motorola or Nokia.

2 being a modern minimalist phone from brands like Light or Punk'd, whose phones are, in a way, purposely dumb.

And these brands are also labeling their phones as feature phones, which is like a flip phone with some additions like a hotspot or a GPS.

How do you feel about the term dumb phone?

What we're trying to do with the light phone isn't to create a dumb phone, but to create a more intentional phone, a premium minimal phone, which, you know, isn't inherently anti-technology, but it's about consciously choosing how and when to use which aspects of technology add to my quality of life versus tempting me with all sorts of vulnerabilities of the smartphone.

In Europe, For instance, you have a culture here in Switzerland and Germany, they don't call it

a dumb phone or a digital minimalist phone, they call it the weekend phone.

1 of the biggest reasons some Gen Zers are reverting to a dumb or minimalist phone is the concern with smartphones' effects on mental health.

We all know that what people convey through the social media, they only convey the best of their life, which makes others falsely believe they live a lesser life by social comparison, which in turn negatively affect their self-esteem and well-being.

Surgeon General even recently stated that 13 is too young to be on social media.

So some are taking the initiative and switching to a dumb or feature phone incapable of browser and social media use.

It's definitely a trend that we've noticed that people have been like very occupied with digital social media for a while and a lot of people want to take a step back and get a bit more detached from that part of the life.

I take my smartphone with me absolutely everywhere, so I decided to jump on the dumb phone bandwagon and test out a couple different devices.

It's my first dumb phone ever, sent over from Switzerland in this mysterious box.

It has a T9 layout which I've never actually used before for typing.

I started finding that Americans in their 20s are on their phones for about 29 hours a week, equaling about 4 hours a day.

Just for reference, my own screen time trends about at 2 and a half to 3 hours, which is a little bit less than average.

The vast majority of my time is spent on messages.

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How The Cellphone Market Is Transforming | CNBC Marathon