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- [00:01]
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- [00:39]
Jason
Hey, this is Jason. Earlier this week I wrote an article called A US Made iPhone is Pure Fantasy. We talked about why that's the case on the podcast earlier this week. The long and short of it is that Trump's dream of moving all high tech manufacturing to the US Is extremely difficult because global supply chains are so intricate. Manufacturing expertise exists primarily in China, Vietnam, Cambodia, and other countries, and the components that go into a phone are often made in those other countries too. But there is actually currently one smartphone that qualifies for a Made in the USA title from the ftc. It's called the Liberty Phone, which is made by a company called Purism. The phone is a version of Purism's Librem 5, which is made in China. The Made in China version of the Librem 5 costs $800 and the Liberty phone costs $2,000. It has 4 gigabytes of memory, and the reviewers say that its specs are pretty far behind most consumer smartphones. And beyond that, not every single component in the Liberty Phone is actually made in the U.S. but the company's been pushing really hard to try to make it as American made as possible, and the fact that it exists at all is kind of a miracle. So I found the way that Purism is approaching manufacturing to be really, really interesting. I called up Purism's founder Todd Weaver to talk about smartphone supply chains making tech products in the United States and tariffs. Here's our discussion. Oh, one other thing. I actually did this interview with Todd on his Liberty Phone, so that's pretty cool. Anyways, here is the conversation. What you're doing is super interesting, and I know you've been doing it for a while. I know that there's just been tons of discussion over the last few weeks about bringing manufacturing back to the United States, the difficulty of doing that with different supply chains and components and things like that. And I know to the best of your ability, you've brought the Libram and the Liberty Phone back to the us. So I guess basically I'M interested in your whole story and sort of how you initially brought Liberty Phone manufacturing to the us.
- [03:00]
Todd Weaver
So let me lay a little bit of the foundation as to how we got to that point. So the first thing is I started the company purism in 2014. The original business plan is actually what we were able to execute on over the course of the last 10 years. So what that is is looking at technology, meaning hardware, manufacturing, software and services and looking at doing a fair number of things different than is currently done. One of those is US manufacturing for a lot of reasons. Secure supply chain where we get to manage all the components, full transparency. Because as an OEM and odm, that's original equipment manufacturer and original design manufacturer, I can also release my schematics and then that gets us to where we're really targeting that security market as well. Because the security market needs to have control and also verify the claims of any technology stack being used. When I started the company, we also did initially laptops and then I knew I wanted to get to the point of phones, but I also knew that I had to increment my way there by building laptops first, showcasing that I'm able to do all of that on the hardware, software, services side and then get to the point of the phone. When we did the phone, we actually. So the initially was the Librem 5 phone. We put that into motion probably around 2017 and then did a crowdfunding campaign to say, hey folks, are the people interested in us producing the Librem 5 phone? Now, at that point in time, we did not talk about us manufacturing. It was a bunch of different differences that we were including in the phone, which we still have today. Here's a primary example of targeting privacy, security and civil liberties. The tech space right now, when you're dealing with big tech, there's a massive amount of overreach. And that overreach is where they're consuming personal data at a rate that is almost incomprehensible to most users. I formed as a social purpose company, which means I put in my articles of incorporation that I'm never going to spy on anybody, we're never going to hold the encryption keys, we're going to make sure you can verify all of our claims. So there's a lot of differences that we have as a company from those early days. We had a very successful crowdfund and then we began doing all the R and D and development. Here's another key distinction. The Librem 5 phone and later Liberty Phone doesn't run Android and it doesn't run iOS, it runs our own operating system, Pure OS. So we actually fully developed a third operating system that has nothing to do with Android. It's not an Android derivative. So you can imagine from that that's also a significant differentiator that we have in the overall company. So after we were successful on the Libram 5 campaign, then what we did is we took our own electronics. Engineers are called EEs. And then we worked with Chinese design and manufacturing through 2018, 2019 and 2020 because that's where every phone is made. So if you go back similarly to when a lot of US engineers were brought into China in roughly the 80s or so, was to educate them on a lot of the high tech space that us was dominating at the time. Same type of thing currently where every phone is made or designed in China. We had to leverage the knowledge base that was offshored into that country to do so. And so at that point we were able to take our designs and then educate our staff on the entire process and produce the Libram 5 and, and then we were able to take all of those designs and spin up our own smt. It's called Surface Mount technology where we can actually produce the entire electronics of the device at our facility, therefore bringing it back to US soil primarily for the security market. But there's other benefits too. US jobs, labor laws. Obviously having electronics manufactured on US soil is something that our whole team has been passionate about. And so we, we have a few different SKUs of our product offering that, that are manufactured at our facility. So you're looking at the total products that Purism brings to market. From servers to mini PCs to laptops to tablets to phones, we have a varying degree of the country of origin for components or the, the total product. So on one end of that spectrum you have the server which is an intel reference design manufactured mostly that those boards are produced out of China and then we're importing it and then we. Our value add for our server are two areas. We it's a the bios that is our pure boot BIOS that basically is a secure bios. And then we have what's in the security space. It's called post quantum cryptography that we've added on top of that. So there's the value ads on the server so not country of origin value for the server side. And then you go through the whole scale all the way down to Liberty Phone and our Libram key that are 100% produced. The electronics produced at our facility in in Carlsbad, California. So on those two products, that's where we take the printed circuit board, which is just a blank board that has no components. We then run that through our surface mount technology by our line operators. And so we go from resistors and capacitors and integrated circuits, put them all on the board, take it off the board, do quality control, any firmware loading, then we assemble the entire phone and then do final software load for the customer and then ship it direct. And that, that whole process is, you know, top to bottom done at our facility.
- [09:32]
Jason
Okay, so I just, I want to know, you know, for my own knowledge, I think that what you're doing is very interesting and difficult and it's not something that a lot of other companies in the electronics space are doing. But I know that there is, there's probably a difference between a phone that is fully made and manufactured in the United States and one that is assembled in the United States. And I guess I'm wondering, like, are you, do you believe that you're manufacturing the phone from start to finish in the United States? Like, there's no question about it.
- [10:08]
Todd Weaver
There's no question about that. So the difference is actually defined by the ftc. So the Federal Trade Commission has language that describes the difference between assembled and manufactured. Okay, so assembly is where you are putting parts together. And they actually even have a sub definition of that called screw driver assembly. So if you only take a screwdriver to it and that's the only tool you're using, meaning snapping parts and you use a screwdriver, then you cannot claim made in USA or you can't even claim assembled in the U.S. okay, so those are, those are definitions by the FTC. So when you're looking at the Liberty phone, and especially even in the video that you watch from cnbc, you'll see that we are taking the best their board and we are doing, with line operators, the entire manufacturing process of all of the electronics, meaning resistors, capacitors, integrated circuits are being put onto that board. So it's going from raw materials to finished goods at our facility. And then we assemble the entire printed circuit board into the actual chassis of the phone, and then we also load our own operating system and, and put that, and then ship it to the customer. So not only are we doing full electronics manufacturing at our facility on US soil, but we're also doing the entire operating system and authorship and releasing of that. So our, we don't just do, we're not just a, what's called a CM.
- [11:50]
Jason
Or concept, you're not buying components. You're not buying components from overseas and then screwing them together here. You're making the components here as well.
- [11:58]
Todd Weaver
That's. So now when you're referring to the term component, components are the things that you're actually purchasing, like a resistor and a capacitor and integrated circuit. Those we are buying from Western distribution. And each chip set that you use has a country of origin now. So in our case, we also use chipsets that are like ST Micro, Texas Instruments. These are manufactured on US Soil. So we also go down as deep as we possibly can to purchase from US Or Westernized distribution or manufacturers of those components and chips. So obviously resistors, capacitors are manufactured on US Soil. We purchase those and install them. When you're talking about the. What's called the PCB is the blank board, and PCB A is the printed circuit board assembly. That A is the important piece of where you're taking those raw components and you're putting them onto a board, meaning soldering them onto a board. And then you have a finished electronic circuit board. When you're talking about other companies, what they're importing is typically finished goods, finished electronics. They're meaning the chassis, the battery, the whole, entire electronics inside. And in rare cases, they might import just the motherboard, meaning the printed circuit board or PCBA assembly. We're very unique in the sense that we actually go from reels of parts in stock all the way to the manufacturing process all the way to finished goods at our facility. That is as a vertically integrated manufacturing process. And that is, as you can recognize, extremely rare in most companies, but very, very rare in electronics.
- [14:02]
Jason
Right. And I want to hear more about that in a second. And I guess the last part of this is the raw materials, the, you know, minerals that are being mined and turned into the different parts that, you know, you're sourcing from. Suppliers are. Do you try to work with suppliers who are making parts using materials mined in the US or is that. Is that too hard to. To follow that deep into the supply chain?
- [14:32]
Todd Weaver
So the first bit is yes, we do. But there's levels of complexity, as you can imagine, where the desire is there, but sometimes the parts aren't, or sometimes the negotiation with the suppliers turn into much more challenging or time consuming for the scale that we happen to be at. And then there's another bit of that, which also is leverage. As if you're talking millions of units, as a manufacturer, you have a lot more leverage than if you have 100,000, right? Or tens of thousands. And so there is a degree of how hard can you push into the supply chain for contractual sourcing of raw materials, meaning earth materials. So what we tend to do when we're doing Liberty Phone is we are using Western distribution, which has to comply with an awful lot more regulation on where it can source components from. And so you can imagine componentry that's built from Western distribution that has to source fair materials is different than those same componentry made from China, where they don't have those same regulations for the raw materials. So it very much similar to a food supply chain. You have the entire same process as it relates to the electronics supply chain. So that same question you could ask to an organic farmer. And the answer is the analogy is very similar, right, of saying, well, hey, how long have you had soil? What are you putting in the soil? Is there any chemicals that you're putting in the soil that are toxic? And you know, how are you defining how you are USDA approved? It's the same type of thing. Same analogy applies. How deep can you possibly go? So our philosophy from the very early days, especially as it relates to US Manufacturing, is we go as deep as we possibly can to releasing our schematics, to sourcing our components, to having our H bomb. It's called the hardware bill of materials, country of origin available, to the transparency of all of our source code that we author being published as well. So you can verify that all of our claims are accurate.
- [16:51]
Jason
Right. So in doing this process, I guess how long did it take you from the idea of saying, okay, we have this phone, you know, you were initially manufacturing overseas and then you decided you wanted to bring some manufacturing to the United States. How long from having that idea to the actual implementation of it. And then also, what was the most difficult part? Like, I'm sure you had to kind of reinvent the wheel in some cases here.
- [17:23]
Todd Weaver
In many cases, yeah. So the first part of that I'll sort of these dates would be confirmed from a bunch of our blog posts and public, you know, press releases and about bunch of other things. But I'll give you the loose time frame. So 2017 was when we actually began preparing to say, hey, we want to manufacture a phone and we would like to do it on US soil. So that was the initial impetus. We then actually manufactured our Libram key as a very small security token at the same facility, same US soil manufacturing process, but. But it was a much easier product to produce. But that also showed, hey, we're able to do it on a simpler product and so we sort of did that in parallel. Then it took about, see that was 2017, then 2019. We were able to get what's called PVT samples. That's where you sort of get the initial versions of hardware being produced. So that two years is really about design changes that we needed developing every bit out. But also in parallel to that we were educating our EEs to say hey, all the while every time we're sourcing a Chinese resistor, let's make sure we're getting the same resistance on a US resistor. So we always were sort of maintaining two different bill of materials of Chinese componentry to Western componentry because they're different. So you have to go that level deep to be able to do it. So in parallel to those couple of years we were following along with all those bits. Then we produced five different iterations of the Libram 5 phone through Chinese contract manufacturing. So that was you know, first version we, we were testing with and had to make a bunch of changes and we iterated through those five changes over the course of about 18 months. At that point we finally had production ready product and then we were able to take everything that we did and bring it to US soil that process. I believe we got out our Liberty Phone at the time we called it the Libram 5 USA. Same product, just different brand name. We shifted to later. That was probably another year, 12 months or so of development effort to do what's called board bring up which is to say now we have to do it all at a new facility, ours where we're doing our own line operators and trying to bring up these boards and then go through all of the, the debugging process to get that working. So I'm going to say probably about 12 months. And then we were at that point, hey, now it can be a product we can put out to market and release it. So to try and restate that, I think with, with understanding where your question was going, if we had Chinese produced parts and we wanted to bring them to us, it would be a multi year effort. If we didn't lay the foundation of get of having the designs under our control, trading up our EEs ahead of time. So that way it only, it quote unquote only was a year of to bring our board and bring it to a fully manufactured US product. You can imagine any other company, if you're coming in cold to say oh this was all done, let's say, let's say an average company which I like to be, you know, sort of cynical of is you know marketing and finance. Right. And they have no engineering skills whatsoever to then say oh we're going to take that what was done in China and just do it on U S soil. They have to find the equivalent type of company which is a contract manufacturer plus design to to to do that. And by the way they don't have the designs. Right. They don't have the schematics and they don't have the designs because all of those were kept. They're kept in the dark from those. They never paid for those types of rights. So you can imagine is this literally starting from scratch say now let's try and bring something on that's similar to what we have and can we maybe can we get permission to it can we get the reverse engineer it? And you can see that that's like that would be. If we were to do that cold. You're looking at probably a three year cycle from. From let's take an existing Chinese product and then just produce the same thing in the US I am speaking specifically to a phone that you know that somebody doesn't have the more complex high tech space. Right. There's other products could obviously be done a lot easier but that's sort of hopefully that answers both the details of the question and also the summary of it's multi year to to take something that you don't have permission to and try to get it produced the same exact way on US soil.
- [22:40]
Jason
Not to mention were there were there specific components or specific parts of the phone that were harder to source in the United States or harder to manufacture in the United States because you know we don't make that type of component in the US or there's not a US supplier that that sells it.
- [23:01]
Todd Weaver
Yes. So there's a couple things. There's there's US and then there's westernized group so something from Germany or Europe or Canada or. Right. There's a bunch of these type that countries where we would where they have manufacturing of that particular component which so we tend to default to as much as we can US based. Then there's sort of this section I'm gonna. I'll give you loose percentages which is something let's say like 80% are US based maybe 19.5% is Western distribution channels and then there's a 0.5 that are coming from non western distribution. One specific item is a type of crystal that needs to be put into phones which is basically for you know keeping track of time and a few other measurement metrics. And that crystal is something that only comes from China. I think you can get it from South Korea, which is, I believe, where we either are sourcing or advancing to source that last component from. And then, and I think maybe Taiwan. So if you, it depends on geopolitically how you treat each of those countries as to country of origin, but that's sort of an example of even where we care to do 100% of it, there's still always something that you can try and dig one level deeper and you realize, oh, that's a mineral or a mineral resource of something that's coming from somewhere that would be outside of us. And then you need to address importing that. And then additionally, is that ever going to be produced in the US or is there some company who would like to begin doing so? And then you would evaluate that company at that point in time. Does that answer the question? Because it's obviously a very complex question when you're dealing with, you know, hundreds, in our case, 200 unique parts and the entire sourcing of all of them. We have gone through the depth of confirming every single bill of materials item. You can imagine the majority of companies who are just selling electronics from manufacturers somewhere else, they don't care. Right. There's no transparency, no visibility, and the company itself doesn't even know the designs or what goes into it.
- [25:41]
Jason
Right, yeah, yeah, that does make sense. And I think, I guess that leads me to my next question, which is I think the fact that you were able to do this at all is pretty amazing. It's a super interesting process. And I know that there's been a lot more reshoring of manufacturing over the last few years, even sort of prior to such a recent emphasis being put on it. I know that what you've been able to build is a great and functioning phone. I know I'm talking to you on it right now. You sound very clear. At the same time, it's like, I guess the most cutting edge technologies at the moment are still being developed in China, in Taiwan, you know, semiconductors at TSMC and in Taiwan and things like that.
- [26:29]
Todd Weaver
I mean, those are two, those are two distinct, distinct industries.
- [26:33]
Jason
Just to be clear for sure, for sure. I guess basically my question is like, do you think that the US can catch up in terms of manufacturing smaller and smaller chips in the US like, you know, sort of the, the cutting edge of the cutting edge. Because the phone that you were able to manufacture in the United States is not as fast as the latest iPhone, for example. Like the processor is not as fast, like all that sort of thing. And I know that you're a smaller company and Apple competes on just like a scale that is almost unfathomable. But I'm wondering if you think that those types of components, like the newest, best chip can be manufactured in the US and what that would take to do it here.
- [27:20]
Todd Weaver
Yeah, so I will answer the question, but also let me provide some context that may help. So the short answer is yes I do because you didn't ask me timing. Okay, so if you ask timing, it's going to be, you know, multiples of years and a major investment and undertaking and it has to show that there's an ROI and have stable, you know, future of like this is going to be the future that we're going to live in. So let's actually invest in doing all of those things. But let me also level set on one important piece. When you're talking chipsets, okay, chipsets, the actual CPUs inside of Apple and Samsung and Google phones, et cetera, those are a complete computer where it's hardware, the CPU, memory and baseband modem, the cellular modem are all combined onto one. And typically that's from Qualcomm or MediaTek. And those particular chipsets, when you're looking at semiconductors, are produced outside of China. So really what you're referring to is the actual design of a finished good saying hey, take the semiconductor and put it into a phone and then add all the other componentry, the 200 and some other unique components into the finished good. And that is done in China specifically for Apple and a bunch of other major manufacturers. So that's sort of just describing the industry is not completely because it's obviously far more complex, but to try and just level set a little bit about that. Okay, so where you're at now is then you're like, okay, let's take what we have in China and try to replicate that in the US well the challenge is that all high tech jobs were put into China, incentivized to be in China. And so you have to have that brain transfer of the, what's called the ODMs, the original design manufacturers. These are the EE's, the electronics engineers that right now if you, if you scoured the United States, you would, you would be able to probably actually still count the number of skilled electronics engineers. If you go to Shenzhen, there's floor after floor after floor after floor of skilled es. These are those who that design the actual board to put into devices so that cross training takes time and effort and energy to get to the point where you can can design new devices. Then you have the next step which is the actual SMT process. Now this is a misconception that has gone far and wide within the media. When you're looking at costing, this isn't something where, let me just put lay one fact down. Machine versus machine. It's the same price to produce a product in US soil or China because the machine is doing the effort. Okay? Now granted there might be a little bit of tolerance, but single digit tolerance for how much it costs for your power. Machine versus machine is the same machine that the SMT machine used in China is the same ones that we can use in the US because these aren't complex machines like semiconductor producing machines, which is where TSMC comes into play and China does not have access to these machines. Okay? So SMT machines are far and wide. Ton of companies produce them and machine versus machine, same cost. The added cost is anytime you have different componentry, as I mentioned, Chinese resistors versus Western distribution, Western resistors that have a higher cost to produce because it has to conform with much tighter tolerances. In China, things can be a little bit looser on tolerances which can lower the actual cost for that particular component. But you're referring to in this case, pennies on the millions. Okay? So very, very tiny differences in cost. So at the end, when you spit this, the PCBA off of the end of the SMT line, what you see at that point is hey, you know what, we're right about the same cost as you see from China. Then you have a person who physically grabs the board and does the assembly, which is a much more costly endeavor in US than it is in China. Then the last bit, which is also something that has never been talked about in the media, is China can solve problems by throwing bodies at it. The US and Western countries can solve problems by throwing engineering at it. So let me just describe to you a concrete difference. If you were to go to Dongguan, China and you see a manufacturing line, they're going to have rows and rows and rows of people who are taking a tablet or a phone that passes by them and they just do pinch to zoom. They have, you know, little tiny finger gloves and they touch the screen, drag it open and drag it back and then it moves on the line. If one doesn't do pinch to zoom properly, they send it back for quality control testing. And you can see that that is a job for an entire row of people. Well, what we did at Purism is we solved it with engineering. How did we do that? Is we actually plug in and we flash the entire device and we run through what we call auto qa. And that is where we actually hack the firmware to actually receive or fake to receive a touchscreen event into the firmware itself on the screen. And then we actually replicate a pinch to zoom, take a picture and then back again and take another picture. And as long as those pictures match, we have functioning touch interface where we didn't have to have people doing that task. So there is this other element of how do you solve problems? You can solve problems in the US via engineering where in China they'll very likely just throw more bodies at it until such time that the engineering makes sense to do so. That's another example of where in the end when you're looking at cost it is a solvable area to mitigate cost increases by doing manufacturing in the US by looking at things like that can describe or showcase something to be done differently. But there's another last bit of that that I think is is also important when you're looking at costing. You can look at our concrete numbers. We sell a Chinese made Libram 5 phone for $799. We sell the Liberty phone for $2,000. When you're looking at just those numbers alone that looks like a giant leap in cost. But that's. There's a couple of factors that that are not publicly known when you're looking at just those pricing. When you're looking at cogs cost of goods sold, our Libram 5 phone is equivalent in cost to about a an iPhone. It's about 500 and some odd dollars, $550. So we can see that the Librem 5 phone doesn't have very high margin. When we sell it the Liberty phone, same cogs componentry wise. But to produce it on US soil we're adding not quite a hundred dollars. So it's about $650 to produce that entire phone. So but what we're doing by selling it for for greater originally we're looking at a lot of differentiators. For us it wasn't just made in usa. It's the fact that it's a secure supply chain. We have staff that's completely auditing every component which means we're selling to government security market with all those additional layers that we've added on top. So there's a reason for having the higher margins because there's higher additional outside of cogs cost. So when you're looking at cogs alone cost of goods sold, our concrete numbers that we can showcase is about a $550 cost for a Chinese manufactured and $650 cost of goods sold for the Liberty Phone.
- [35:56]
Jason
Right. Okay, that makes. Okay, so I mean we've gotten this far in the conversation without really talking too much about tariffs and sort of like bigger, you know, the idea that more companies are going to, going to bring manufacturing back to the US I guess first and foremost, I guess there's a pause on the tariffs. But the tariffs as announced, you know, would they impact you far less than another company? I imagine they would. Because you're making this in the United States for the Liberty Phone.
- [36:59]
Todd Weaver
Yes. So when you're looking at the Liberty Phone specifically then as I, because I shared also the sort of rough percentages that you'll see that will be impacted by importing any of the componentry for anything that's outside the US so roughly in that 20% of our actual hardware bill of materials will be impacted and that's it. So a very, very small amount for the Liberty Phone will be impacted because we're already doing all of these things that, you know, US manufacturing. When you're looking at the opposite end of that spectrum of a server that we're importing and we're adding our security boot firmware to and post quantum cryptography services onto, we will be fully having to absorb or pay the import duties on the, on the server. So it does depend on which sku. So that one's going to impact us heavily and it just depends on where, you know, where are we doing that, the manufacturing for each of these devices. It does incentivize us to, you know, on the big picture plan of our company was as we put out product, we move more and more of it to US Manufacturing as an overall business plan of ours from 2012 when I first wrote it. And so now it's going to be a, you know, a cost comparison of well, hey, are we, are we going to just decide to manufacture that board on our own as opposed to importing it for any of those other products we don't currently do it for? So when you're referring to tariffs, it's going to have an impact on some of our SKUs and no, relatively no impact on the SKUs we're already doing U S manufacturing.
- [38:48]
Jason
Do you feel like you are in a better spot than a company that is doing all of their manufacturing in China, for example, because you've done all this legwork?
- [38:57]
Todd Weaver
Yeah, without question. And this is and this is also gets to. If they're a vertically integrated company where they have engineers, they have designers, they have, you know, the knowledge to be able to do it, then those companies will be able to adapt and, and bring it for, you know, bring. If they so choose to do US Manufacturing, they have at least the ability to where a company, if that, if that company is marketing and finance and that's really the bulk of what they're doing. And they don't have any engineering and they're, they've offloaded all of those tasks. If they have no R D budget and they have no operating expenses for any type of engineering or manufacturing, then they're gonna, they're gonna be in a very difficult position. Because you can also imagine there's kind of a run on the bank, right? Everybody is going to be looking for a company who can build their product at the same time. When, when that company is only familiar with marketing and finance, they have no knowledge of how to do it because that entire, the entire process has been brought into China. Those companies who do marketing and finance only, which by the way is the bulk of them, they, they have to find when they, when they communicate into China. You're basically talking to a project manager, right, who's finding all of the right parties that does all the other tasks and then they bring in all the engineers and everything else that's needed operational. And what you're receiving at the end of the day is something you can drop ship to a customer without ever actually even opening the box. That entire process for a company who's doing just those two areas, you know, finance and marketing, they're going to be very challenged to find somebody who's going to fill that same void at the same time that everybody else is looking to see if they can fill that void.
- [41:01]
Jason
Right, right. Let's talk about labor really quickly. You are doing this manufacturing in Carlsbad, California. There's not a lot of factories in the US that do this sort of thing, I wouldn't imagine. I mean you have things like. Yeah, it's correct, but I guess you do things like, you know, SpaceX is in the U.S. i know it's totally different thing, but it's like we do make high tech products in the United States. Correct. Did you, did you find it difficult to find workers who were able to, you know, work on a high tech factory line or is it something that there's plenty of people around?
- [41:40]
Todd Weaver
Okay, so not, we did not have difficulty in line operators. Okay. And, and high tech or what we Call skilled labor of you're able to solder something. Right. Or do you know, assembly with tweezers. Right. So that type of skilled labor exists, but also in pockets. Like the root of your question, if you're to say why are in the world are you in Carlsbad, California? It's because there's skilled labor there, that's why. Because there's companies that, that currently provide government manufactured high tech that are located there. So that's where the labor is. That's why it was easy for us to spin up a line there and hire skilled labor from some of the other companies who have trained up those same staff. Now then there's a second part of your question is the electronics engineers. So skilled labor is of course high paid and it's, you know, you have to be trained up on the task and then it's a little bit of rinse and repeat sort of the same job over and over once you're trained up. Electronics engineers is a rarer position. And that's what I was describing earlier. When you scour the nation, you'd come up with, you could count the number of electronics skilled electronics engineers in the US soil and there's probably a million in Shenzhen alone.
- [43:13]
Jason
Right, Right.
- [43:14]
Todd Weaver
So that's a much more skilled position and harder to find because that type of position has not been something that's been focused on within education or US labor training.
- [43:30]
Jason
Right. And you sort of just mentioned this, but I know there's a pause on tariffs, but I'm sure there's a lot of companies who are thinking like maybe we should bring our manufacturing into the US or to the extent that we can. And one thing that I worry about or think might be a problem is if you have tons of companies trying to do this all at once very quickly, you know, what is that going to like? Are there enough skilled people to do that here?
- [43:59]
Todd Weaver
I think you can answer that question. You're probably about to. The answer has to be no because there just is a, there's a cap of you reach saturation and then there's more requests. It's the same thing as run on the bank. How many bank tellers do we have if everybody were to go try and ask for money out of their bank? So there is definitely a shortage. It's sort of, let's say, an equilibrium point right now. There's enough skilled labor to handle the, the necessary manufacturing that we're currently doing. And you know, if you increment it slowly, then you can probably get there because these are skilled Positions. If you're talking full es, that's multi years of education to get to the point of actually being able to do proper designs that actually work. So. But there's another bit that you sort of hinted at there that I think is important. I don't think you specifically asked the question, but I'm going to address it as if you did. Which is to say the reliability of knowing that a tariff is in place and how long it's going to be in place allows a business to make informed decisions. So if it was something where you had, you know, you knew that importing from China is going to be 100% tariff for the next 10 years, concretely every business owner would be making decisions based off of that, that assumption and that reliability of that assumption is important. If it's something where the reliability of that is, hey, this is what's going to be 100%. But hey, in two months it might not be oh, what's going to happen in two years or in three years or in four years and every one of those scenarios becomes a change of variable. It makes it very hard for a business owner or the board to get to approved budget is a yes. It's worth spinning all this up. And if you take the concrete example I shared where you're going to, if you're starting from nothing and you did it as fast as possible to bring high tech into a finished good, that's probably close to about a three year cycle to get it out the door. And then your question is, is that, you know, was that worth it on an ROI basis? So the businesses are really going to be evaluating. Right. What is it? You know, is it singular which is tariffs or is it for a lot of other reasons? One of the benefits of what we have done is we have significant number of differentiators, one of which is made in USA for the secure supply chain side. So we know we're going to be continuing to manufacture our phone on US soil no matter what's going to occur over the course of the next few months, weeks, years, et cetera.
- [46:49]
Jason
Right, right. You've been very generous with your time. I have like maybe two more questions if you have time.
- [46:55]
Todd Weaver
No problem, Absolutely. It's actually what's nice when I'm talking to you is that you clearly have done your research. So it's actually very, it's enjoyable for me as well.
- [47:04]
Jason
Oh, thank you so much. I wanted to ask about the automation side of things. You said earlier that with something like quality assurance on pinch to zoom, China can afford to have people on a manufacturing line doing that, whereas you had to solve it engineering wise. I know that manufacturing is getting more and more automated, but like how automated is your line at this point? And do you think that a lot more automation is coming when it comes to things like assembly? Or is this something that we still need a lot of people to do? And I know that's a long question, but I'm going to add one part which is like, is there a timeline for like, oh, you can just replace many of the people on your line with a machine that's going to assemble this stuff?
- [47:53]
Todd Weaver
Yeah. So it's actually the answer is far more practical than you would imagine. It is economies of scale. So initially when we're looking at doing smt, that what we're using the machine for is really just the pick and place of the componentry and soldering it into the finished board. There's still additional steps that occur after that. But that machine is built for that purpose and that is the automation piece of it. Then you have all these other things. So imagine it as like that machine can do it for all sorts of different electronics. Right. It can do it for a very tiny little sensor that goes into a car. It could do it for your television set and it can do it for our phone. So that is a purpose built automation machine for smt. Then you get into, oh, well, you know, what does purism need afterward? Well, we actually have to hand solder on the battery controller and the headphone jack because those are through hole on the pcba. So there's actually a step of hand soldering it. Well, we're hand soldering it right now because our economies of scale make it where that's still okay to do. From a cost perspective, we could clearly add an automation step onto that. And how that works pragmatically, of course is you first manually do nearly everything and then you determine, hey, what are the repeatable steps? And then, hey, is there a means of automating that through robotics or through existing hardware that machines that can do it and then you tack on those pieces until you get to the point of a completely finished and assembled good. So it is really more economies of scale. So if we were putting out a million phones every year, that would be. We would have different automation because of that. Where we would be applying manual labor would be very costly on a piece by piece basis at that volume. But if you're doing smaller volume, then it's, you can absorb it as, as sort of like, hey, this is still manual because the cost spin up to automate it is actually more, more expensive than me paying out a person over the course of even multiples of years in some instances.
- [50:20]
Jason
Right, right, right. And then I guess the last thing is you've now been doing this for a lot of years. There's obviously reasons for you to do it in the United States. In terms of things like secure supply chain, like you were saying, I know that you're very privacy focused, et cetera. I mean, did you look at bringing the manufacturing to the US is like a political project for you? Were you interested in the politics of like doing this in the United States or was it a matter of differentiating yourselves? And also, you know, it's important to some people to be manufactured in the United States. It's like when I buy clothes, I very often try to buy clothes that are made in the United States.
- [51:04]
Todd Weaver
Yes.
- [51:05]
Jason
Or was that kind of.
- [51:08]
Todd Weaver
There's like probably about 10 items on the list of reasons why we chose to do manufacturing in the US and obviously one of those is from a civil liberties perspective. So manufacturing high tech componentry in a hostile nation to the United States is not good geopolitical politics. Right. So what you have there is that element which is saying, hey, to build secure devices, we should not be paying for funding and manufacturing electronics that are then implemented into the US infrastructure from a hostile nation. Right. That I think the majority of people can agree that that is probably a really good policy. And so then there's another bit of this is purism. As a company, we also care tremendously about civil liberties. This gets relates to the privacy side of things, which is to we manufacture a phone that doesn't spy on you. Right. So when you compare an Android phone to an Apple phone to a Liberty phone running Pure OS, the iPhone's going to leak about 3 gig of data that you don't know what it is. The Android phone is going to be a 4 gig of data that you don't know what it is. But it's obviously you have a general idea that it is your digital life that's being exploited. And we took it as we send exactly zero bits. Nothing is sent or received from our device. That's why we manufacture it and also do all the source code. So how that relates back to civil liberties is we need to verify all of our claims. Right. We can't have some nefarious chip put in to the supply chain from a hostile country. So that there's sort of, that you can see that there's sort of a woven fabric throughout the company and why we're actually formed as the Social purpose company. So I could enshrined in my articles of incorporation those important distinctions. So then when we bring on staff, they understand those and are aligned with that overall vision. So the short answer is not in the short term political game, but more of the geopolitical game and also understanding security and privacy and sort of how all those things weave together that manufacturing on U.S. soil is significantly beneficial to users and governments that we sell to.
- [53:35]
Jason
Right, right. And then, you know, just sort of looking at, I think no matter where you are on the political spectrum, you can look at the last two weeks of tariffs, more tariffs, maybe not tariffs, maybe a delay in tariffs. And you mentioned the stability of sort of knowing what the rules are going to be. I mean, are you able to sort of look at this and say, you know, we did our homework ahead of time, we're making this stuff in the United States and, and not stress about it as much, I guess, or, you know, are you following it very closely?
- [54:10]
Todd Weaver
Well, well, I think, I think anybody who reads anything on newsworthy has to follow it closely because it is the biggest topic to be talking about right now. And so the, I do not stress about the SKUs that we are fully making in the US right. That those are, as a matter of fact, just, just earlier today we were talking about, hey, we got to start evaluating any componentry we're bringing in and the time frame we're looking to do it. What is the tariff from those countries on those components? We don't have to worry about it for our US side. Right. Because the majority and any SKUs we're doing there are not affected. But we are already looking at what, hey, you, you realize you have to project out, right? It's not like you're buying everything every day. So you're, you're projecting out what is it going to be in three months? Should we buy it now? Is it, what is it going to be a year from now? Maybe should we stock up on a bunch of other things? So this is where the certainty is very important. If things are certain, you can then leverage that assumption at the top of your decision tree funnel. If you, if it's uncertain and you're like, great, hey, what if I buy it today? Well, and let's say that somebody on your procurement team says, well, maybe we should wait a week. Right. Because if it's going to change, is it going to change for the better or worse? And you can imagine that little micro example carries forward to everything else that a business has to decide is what is the, you know, we're always doing ROI calculations what is the cost? And cost is one of your also top of funnel decision trees of everything you're trying to do because that becomes the basis for your ending price. If that, if that. So it's take a tariff example. If the tariff from China is 100% and you know it is going to be 100% for the next 10 years, you will make a bet a different business decision then if it is, might be 100%, not sure what's going to be in three months, what's it going to be in a year from now and what's it going to be in three years from now that that uncertainty does not create stable markets. It does not create very accurate business decisions. So what you need in the classic decision decision tree, if you have how accurate are your assumptions, the assumptions are your inputs. If you have accurate assumptions, you can then have accurate outputs. If you have inaccurate assumptions, your outputs are clearly going to be a much higher degree of tolerance toward the inaccurate side of things.
- [56:49]
Jason
Right, right. That makes sense. I think that's very, I mean that's what I would imagine you'd say just because, I don't know, we buy like T shirts for our, you know, little merch store that we have. And, and even that has gotten a little bit complicated. And so doing anything more complicated than that I could imagine just be, well.
- [57:11]
Todd Weaver
Your example of T shirts, which is, which is a great example is right now if you, let's say actually let's say three months ago, if you bought a T shirts you knew and for many, many years in the past you knew your supply chain costs. Right. And then now you're saying, well, should you buy T shirts today or in a month or should you try and like, you know, should you stock up on them now or should you just try and buy the minimum and then buy later and now you're unsure of what is the cost going to be. Whereas for the last quite number of years you have known that granted Covid did a big number on supply chain pricing and a bunch of other challenges that came with just in time manufacturing that most people did at that point in time. Time. But you can, you can imagine what, what's the root issue of your T shirt purchasing decision is you're saying my, my historically, you know, input variable of assumption was I always knew my cogs in my cost of goods for this T shirt was always going to be roughly that price plus or minus maybe you know, 0.1% or something so tiny it was irrelevant. It didn't really even factor into your decision tree. Now you may be in a position where you're like, should I buy a bulk amount of T shirts? What is the country I'm buying them from? Who should I buy them from somewhere else? And you have to sort of pull it all the way back to your source determination. And I think everybody can understand that uncertainty is not helpful for making decisions and certainly not helpful for markets.
- [58:49]
Jason
Right, Right. Okay, last question, I promise. I have up your table of origin on the Liberty phone site and most of it is USA. But then you have the M2 modem module that says it's origin declaration is China. It says inquire for USA EU options. And then the WI FI Bluetooth module says India. Is there a specific reason that those two components are not usa? Is it just there's not a US option at this point point or, or What?
- [59:18]
Todd Weaver
So the M2 module, we, we, we actually have us made and then we also have European Germany. So that module, that, that module specifically for cellular, it depends on the bands that you're looking to install it at or in some cases cost. Right. So we have that as an actual module that you can snap in. And then so depending on what you're looking at, we're able to sell the Liberty phone with all the electronics manufactured at our facility with and you put on this extra module that can come from any number of countries depending on your specific needs. The one that we ship for when we sell the Librem 5 is a Chinese modem broad mobi and that's the default, which is why we listed China first for that specific moda module. But we have US made and, and a few other westernized countries for that model module. The second one that is the WI FI module, there are options for other countries of origin. India is not as seen as a, as, as hostile to the supply chain as China or you know, you know, other more hostile countries. And so that's an acceptable means of installing for most of our consumer base. We do have some customers, think government agencies that are, that, that want very specific country of origin, US based or western distribution for those two additional components.
- [60:58]
Jason
So I mean, so the reason we.
- [61:00]
Todd Weaver
Chose it as a module is so we have the options of different bands, different country of origin and be able to put that in sort of after the fact or during final assembly.
- [61:13]
Jason
Got it, got it. But I would just imagine that the Chinese one is a lot cheaper at the moment.
- [61:21]
Todd Weaver
Absolutely. Got it. It's cheaper, but it also, and it also has pretty wide bands pricing of these. But let me also describe a little bit of difference. If it were integrated, the cost difference would be, would be not as significant because it's actually a secondary module. There's not as big of a market for that type of chipset. So therefore manufacturing in lower quantities outside of China does add to that cost. But maybe think of it as, you know, probably double the cost to manufacture to, to use a chip, use a module that is manufactured outside of China.
- [62:01]
Jason
Right. Right. Okay. I, I think that's all I've got for you. I really, really appreciate your time. This was super interesting. I don't think I mentioned this, but I'm in la, so I mean, I don't know if you ever. I. I know that CNBC did that thing a few years ago, but I mean, I'd love to come see it sometime. Sure.
- [62:22]
Todd Weaver
Yeah, there's sometimes we give tours in the rarest of cases if it's like obviously for CNBC or if it's large purchasing or if it's sort of verifying secure supply chain. So we do from time to time do it. What I can do is just make a note here and next time I'm down there, which makes it easier to give a tour that I can have you pop down from la.
- [62:48]
Jason
Yeah, that would be cool.
- [62:49]
Todd Weaver
Awesome.
- [62:49]
Jason
Thank you so much.
- [62:50]
Todd Weaver
Yeah, thanks, Jason.
- [62:57]
Jason
Thank you all so much for listening. We're going to try doing interview podcasts like this a little bit more often. We'll be back with our regularly scheduled podcast on Tuesday, but we're going to try to do bonus episodes every now and then. If you like this, let us know and we'll be back soon.