Brief:
- Google closed a $1.1 billion deal with HTC to add more than 2,000 mobile engineers in Taiwan to its ranks, according to Bloomberg.
- Google seeks to design more of its own consumer hardware and may get into the development of special-purpose chips, as Apple has done, Bloomberg said. Google's most recent Pixel device had a new image processor to improve the camera, and the company will create more "custom silicon" in the future. The search giant previously focused on software, such as the Android mobile operating system, while device makers like Samsung and HTC handle hardware.
- Google plans to spend more on research and marketing, reach deals with more phone carriers and retailers and expand into markets globally. For now, sales of Pixel devices are limited to nine countries, including the U.S., Germany and Singapore. Google first announced the acquisition of HTC's smartphone business in September, per Fast Company.
Insight:
The arrangement with HTC is somewhat unusual in that the search giant won't get a direct interest in HTC, but instead will have non-exclusive licensing rights to HTC's current and future intellectual property. The deal isn't the search giant's first foray into mobile hardware development: Google bought Motorola Mobility in 2012 for $12.5 billion in an effort to develop better phones at lower prices. The deal flopped as Google failed to integrate the business with other operations. The company then sold most of the unit to Lenovo Group for $2.91 billion in 2014, but maintained ownership of a significant part of Motorola Mobility's patent portfolio. Google also bought smart-home device maker Nest and the video streaming camera company Dropcam.
Smartphones increasingly need close integration of their software and hardware to handle new technologies such as artificial intelligence (AI) and augmented reality (AR), which overlays digital images on a real background seen through a smartphone camera. As Bloomberg notes, a bigger step will be creating a "system-on-a-chip" similar to the main processors that Apple puts inside its devices. Qualcomm currently provides most of these chips to makers of Android phones. Google plans to keep working with Qualcomm for now.
The HTC deal runs the risk of alienating other makers of smartphones that use Google's Android operating system, notably Samsung and Huawei. As Google positions itself to compete more directly with the companies, they make seek to develop more of their own hardware. Samsung is estimated to have shipped more than 300 million smartphones last year, dwarfing sales of Google's Pixel phone. But as consumers rely more on mobile devices than on desktop computers, Google needs a platform to maintain its dominance in paid-search advertising.
