Google announced that it was paying $1.1 billion for the division at HTC Corp, which is based in Taiwan, that develops the Pixel smartphones for the U.S. company. This is the second big move by Google in phone hardware, following an earlier failure that was very costly.
The deal, which is all-cash, sees Google gaining 2,000 employees at HTC, which is approximately equal to 20% of the Taiwan-based company’s complete workforce.
The deal also included a non-exclusive license for the intellectual property of HTC and the two companies have agreed to look into other areas in which they can collaborate down the road.
While Google will not be acquiring manufacturing assets, this transaction underscores the ramping up by the company of the ambitions it has for Android powered smartphones during a time when media and consumer attention is focused largely on Apple, its big rival.
Google felt it was necessary to obtain a hardware team of its own to help bring new innovations to its Android devices, so they can become competitive with the iPhone, said one analyst in Asia.
This move is part of Google’s broader yet still nascent push into the smartphone hardware world that saw it hire former Motorola executive Rick Osterloh last year to run the hardware division.
It comes as well ahead of the launches of new products October 4 where there is expected to be a pair of Pixel phones along with a Chromebook.
The Pixel smartphone launched in 2016 has a market share that is less than 1% worldwide with shipments estimated to be only 2.8 million, per IDC the research firm.
Google will try to not repeat the mistakes it made when it acquired Motorola Mobility in 2012 for over $12.5 billion. It ending up selling it to Lenovo Group of China for $3 billion just two years later when Motorola did not product products that were appealing to the consumer that were able to compete with Apple’s iPhones.
However, this time, the price tag for the deal is far smaller and not having manufacturing facilities lowers the risk as well.
The strategy of Google to licensing Android free and profiting from its embedded services like maps and search has made the Android the leading mobile operating system with over 89% of the worldwide market, showed data from IDC.
However, there has been frustration on Google’s part due to the emergence of a number of variations of the Android and the inconsistent experience produced by that.