Why the U.S. Military Should Not Carry the Same Phone as Your Kid

Hey everyone. Welcome back here to Techstrong TV. I always get a little excited when I find out that we've got someone from the local South Florida community here on Techstrong TV with me.

I founded Techstrong here 12 years ago now, almost 13 years ago. And before that, I actually had a company down here. And over those years it was few and far between that you met a tech company that was based here in Florida, or you met local.

And so it's always good to have a local here with us. And I want to introduce you to Robert Morkos, who's the CEO of a company called Nexa, and happens to be based here in Hollywood, right near the airport in Fort Lauderdale, as a matter of fact. Robert, welcome to Techstrong TV.

It's great to have you on here. Thank you so much for having me. I really appreciate it.

It's our pleasure. So, Robert, we're going to get into Nexa, and you're one of the co-founder, CEO there. But, I always want to let the audience know who they're watching and how they got here.

So give them a flavor for how you got here, what you've done to this point that led you to here. Sure. So I was raised here in South Florida.

Good for you. I went to Florida State University, so still in Florida. And when I got out of college, I said, "You know what?

" So we've been here since 2011 with Nexa, way before it became sexy to have tech in South Florida. So we're one of the originals to have an organization here. Yeah.

What led me to start the company is when I was younger, we were trading mobile devices before there was a secondary market, and I learned the in and outs of the mobile business and how it worked. Obviously, that's completely changed. And I took those learnings post-college into building purpose-built mobile devices for enterprise.

When you saw what was out there, I realized that there's just no reason the United States Air Force, as an example, should be using commercial off-the-shelf product, the same product I would give my 11-year-old son. And that there was a gap in the market, and that's something we looked to solve. I love it.

It's so interesting because all we hear about is we can't make phones in the US. So are you designing them in California, à la Apple, and having them built in China for the most part? Or are these being built or assembled in the US?

Or where's the line there? I'm sure it's probably changed over the years. Yeah.

So, it's changed, and we service a lot of different enterprise. We service retail customers, we service government, we service healthcare, and they all have different requirements. So for some, we're designing and engineering, but here in South Florida, we have another office in Bangalore, India, that we do some design and engineering.

It just depends on the client. As it relates to manufacturing, years ago, I think it was 2023, we saw the writing on the wall with where the market was going. So, as opposed to making 100% of the product in China, we started moving a lot of the actual manufacturing and assembly out of China so that we had a better option for our clients.

So we have opened up Vietnam, we've opened up Taiwan, we've opened up Japan recently. And even for the US, for the actual assembly at a smaller scale, because it's not necessarily needed for everyone. The design, the engineering of the product, there's a lot of critical aspects to that.

But in terms of the actual manufacturing, that's still a little fluid, depending on the client and what they're looking for from a security and overall assembly and manufacturing perspective. I love it. Robert, do you foresee a point where we will assemble more and manufacture more phones here in the US?

I think we're very much used to low-cost product, right? Mm-hmm. And I wrote an article about this.

We just don't have a downstream supply chain in the US for the other components. When you think of a mobile product, it's going to have, I don't know, minimum of 300 pieces in it. We don't have that here.

It doesn't exist. Just doesn't exist. Yeah.

So if you brought it here, even if you imported all 300 pieces of these components domestically, then you'd have to say, who actually has the capacity capabilities of even doing this? Today in the US, you're far and few, when you think about what organizations could actually do this even if they wanted to. So that's the high level at scale, not necessarily.

However, for critical products, yes, so government devices, and things of that nature, there will be, but that's not the consumer scale of the tens and hundreds of millions. No. You're not going to run at that level.

I get it. Let me ask you a question, Robert. The use case for the military, even I understand.

And I think a lot of our audience understands. You want to make sure your supply chain was secured. We saw what happened in the Middle East with Israeli phones and walkie-talkies in Hezbollah.

So forth. No one wants that. But let's get beyond the government use case.

What are some of the enterprise use cases for- For purpose-built wireless devices like this. So I think, prior to these shortages, they happen all the time, but if you think of the big one in recent memory, in 2020 when there was a memory shortage, right? Prior to that, excuse me, not memory, there was semiconductor shortages, right?

Right. As you can recall. And now we've got- Now there's a memory shortage.

Now it's, see, it's fresh on my mind. Yeah. Right.

When you think about that in 2020, prior to that, it was business as usual. No one really thought about these things, right, as critical products. But when you think about these different organizations and the way they're using products, I'll give you many examples.

So your healthcare organization that makes a brain implant or a cardiac implant, you need a mobile device to extract the data and securely send it to the cloud. So think of a mobile machine that extracts data via an actual implant. Or if you think about a food delivery service that actually has to send your order when you make it to a restaurant.

Or even think of a police ambulance. These are not normal consumers, right? Critical comms.

When you think of all these organizations that historically get what they need, the mobile device in unlimited quantity, and never think about it, after those shortages, it's become clear to all of them that these are not just consumer products, that this is actually, for my business, a mission-critical machine. I can't operate my business without it. So everything, I think to answer your question, healthcare is a huge one that needs mobile devices.

Everything. Everywhere you go, you see a screen, right? And that's being used in an enterprise setting.

So there's so many different other use cases, but healthcare, retail, defense, critical communications, first responders, different things of that nature. I love it. Robert, before we get into the CRADA, the C-R-A-D-A, with the Homeland Security and investments and so forth, we didn't mention anything about Nexa's website or how people engage.

Well, you know better than me, what's the website? com. com, just the way it's going to stay, your name in the bottom third here- That's correct ...

of your screen. Okay. And customers, let's be clear, you're not selling a custom-made phone to individuals.

You're selling these to enterprises, governments, people who have need. And when I say phone, I don't mean just phones, wireless devices, cellular devices, enterprise wireless. Right?

Someone shouldn't call you up, you're looking for an iPhone knockoff, something like that, right? Yeah. My mom still thinks I fix iPhones for a living.

Yeah. Oh, look, I get it. Anyone who's in IT will tell you that most of their IT work is for free for their family.

Mm-hmm. You become the family fix-it guy. " Anyway, let's come back to this, though.

You recently announced, is it pronounced CRADA, C-R-A-D-A, or how do you pronounce that with the Department of Homeland Security? Correct. CRADA, so Cooperative- CRADA ...

Research and Development Agreement. What's that about? So we signed a CRADA with DHS, so Homeland Security.

Just a few months ago, we announced it, and it's relatively straightforward. Large organizations have historically bought consumer off-the-shelf product. That's been the model.

We've shifted that with a lot of our enterprise clients pushing back to about 2018, and obviously, some of these shortages have helped them understand the gap in the supply chain. And the end of the day, the DHS is no different, right? A lot of the products they're deploying are of consumer, commercially available products, right?

That they just find, use, get through the supply chain, and there just needed to be a better way for them to do it. They agreed, we agreed. So, we're excited to partner with them, as an OEM, to be able to provide them the latest and greatest technologies in a different way of engaging overall.

So today, if you think about it, a new technology comes to market, they get it, they test it, and it's there. It's almost just available on a device you can buy at a local Best Buy, right? Whereas we want to put them, the same way we do with all the enterprise clients we have, in the driver's seat, which means, "Hey, here's a future technology.

We want you to test it before it's commercially available, so you can then provide feedback to us, so we can make things available as standard in our products," but so can all the other groups. I think we love feedback. They have feedback.

They're a specialized use case, right? So this allows them to connect all the other-- They've got a pretty big ecosystem of partners, app partners- Sure ... over-the-top communications, right?

Different things that they would want. So this allows them to bring together that ecosystem to pilot test new technology, to provide feedback to products before they get to market, versus, "Hey, it's on a shelf. I would really like if you can do this in future iterations," which is the general business model today for them and many other groups.

I love it. So Robert, again, I want to make clear, the phones you're building, I'm assuming they're Android based? Yeah, correct.

You're using the open source Android and kind of forking or going from there? So not open source, because anyone can do open source. We actually do it a little bit different.

There's about 100 partners that Google has, that have an Android license, that build certified Android product where Google actually puts their stamp on the security, that it's the latest and greatest. Out of those 100, you would know the overwhelming majority of them as consumer brands, so a Samsung and Nokia Samsung These types of groups, right? Then there's a few of the enterprise groups that we would all know, the Honeywell, Zebra.

We've positioned ourselves as the custom provider for enterprise in private label. So we found a nice market where there's organizations that don't want the consumer product, and they want variations of what an enterprise can get. And the rationale is actually relatively simple in terms of what organizations, doesn't matter, healthcare, defense, retail, they're actually looking for three simple things.

Number one, I need product that's actually available for a long scope. So I need to be able to get a machine and continue buying it for three, four, or five years. When you think about it today, using the iPhone as an example, consumer product, there's a new version every year.

It's a cycle. So if you think about it, if you're opening up, if you have a franchise and you've got 5,000 locations, you're not going in day one. There's time.

It takes time to approve, and it takes time to deploy, right? The other thing they want is a lot of these organizations are global, so they want a machine that they can import and distribute into 30, 40, 60 countries. Think of clinical trial business, right?

They have to do clinical trials in 80 countries. You can't actually do that with a consumer product because you have multiple other versions of the product. You have multiple other versions that you would have to have per market, North America version, Latin America, Europe.

So imagine how much better it is for a business to have one solution that can be brought into the countries. It helps you get to market faster. And the last one is some level of customization.

Now, that can be very simple, like I want my logo on the back or something like that of a machine, or I want special packaging, or it could be significantly more comprehensive. So custom software, security updates in a different cadence, the ability to pre-test things, the ability to customize ROM, or even different unique form factors. Those are the three things that regardless to what vertical the organization plays in, they're all looking for those three things or some variation of those three.

Got it. Robert, one last thing I want to hit because we're over time, but I really wanted to go into all these things, but you guys also recently announced a $100 million investment in domestic manufacturing and collaboration with Qualcomm, who is one of the dominant chip vendors in the mobile world. Talk to us about that.

So, we announced that ourselves, not necessarily with Qualcomm, although- Oh, okay. I'm sorry ... there's a lot going on there that would require Qualcomm.

So there's significant growing demand for domestic design and engineering of mobile products in the US. So not just handhelds and tablets, right? Everything from counter-drone technology to designing more critical comms machines to designing first responder products.

So, obviously, the volatility of the chip market. So, what we're doing is investing in strengthening the supply chain domestically of being able to do more of that design engineering and some manufacturing here. So that's everything from more licensing with Qualcomm, more platforms so we can build these products better, faster, cheaper, domestically, right?

Powering not only ourselves, but other clients that need them. Significantly more engineering domestically, right? This is very specialized engineering to build Android products on a Qualcomm chip.

It's not very easy. It's very quite difficult, and you need the right organizations, and obviously- Sure ... people to do that and partnerships.

So that's it, so that we can-- Hopefully, that makes sense, but licensing, engineering, and more just domestic capabilities is where our focus is going. I love it. Excellent, man.

Hey, Robert, we're about out of time. First of all, congratulations on the success. It sounds like things are going gangbusters there at Nexa.

But like so many other companies I've met, people say, "Oh, I just heard of this company, Nexa. They're like an overnight success. " Well, no, you weren't here in 2011 when we started this, right, 15 years ago.

And so it's one of these, again, long-term overnight successes people don't know. I've had the pleasure or not of doing three or four startups in my day, and I know the blood, sweat, and tears that go into it. So congratulations.

Keep up the great work. And next time, in person here in the studio. Yeah, absolutely.

Thank you so much for having me. I appreciate it. It has been a wild ride, 15 years.

We definitely took the scenic route to get here. So, thank you, and yeah, next one, I will come visit you guys up there in Boca. Very cool.

Robert Morcos, CEO of Nexa, here on Techstrong TV. We're going to take a break. We'll be back with more Techstrong TV in moment.