Google has just signed a definitive agreement with HTC, effectively letting the former buy a part of the latter’s engineering and design team for $1.1 billion.
As confirmed by the companies’ press releases, the deal means that Google will acquire around 2,000 HTC employees, who have already had experience in working on Google’s signature Pixel devices.
“These future fellow Googlers are amazing folks we’ve already been working with closely on the Pixel smartphone, and we’re excited to see what we can do together as one team,” said Google’s senior vice president of hardware Rick Osterloh in a blog post.
The deal also gives Google a non-exclusive license for HTC intellectual property.
The agreement was described by Osterloh, who was a former Motorola executive, as a “testament to the decade-long history of teamwork between HTC and Google.”
Meanwhile, although specific details of the agreement have not yet been released, HTC clarified that it will still continue holding on to its “best-in-class engineering talent.”
“This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and VIVE virtual reality businesses,” said Cheng Wang, chairwoman and CEO at HTC.
HTC has also confirmed that its engineers are working on their next flagship phone, which follows the launch of the HTC U11 earlier this year. According to its press release, it will also continue investing in other next-generation technologies, including the Internet of Things, augmented reality, and artificial intelligence.
As for Google, the agreement allows it to have a tighter grip and control over the design and production of its products, including its Made by Google products.
Made by Google products were introduced last fall, and it included Google Home, Google Wifi, Daydream View virtual reality headset, and Chromecast Ultra. According to reports, the second generation of products are set to be uncovered on October 4.
“That why we’ve signed an agreement with HTC, a leader in consumer electronics, that will fuel even more product innovation in the years ahead,” said Osterloh.
The deal is subject to regulatory approvals and customary closing conditions, and it is expected to close by early 2018.
According to analysts, this move is an evidence of Google’s ramping up efforts to compete against Apple Inc in the tech market.
“Google has found it necessary to have its own hardware team to help bring innovation to Android devices, making them competitive versus the iPhone series,”said Ming Huan, an analyst at TrendForce.
Google’s Efforts for Hardware Control
Six years ago, Google announced its buyout of Motorola Mobility for $12.5 billion, but the acquisition was generally tagged as a “mistake.”
Once under Google, Motorola opened a US plant and offered customization options for Moto X smartphone. However, it was believed that Motorola failed to make its product appealing to customers. Google sold Motorola off to Lenovo for less than $3 billion after just two years.
Presently, the latest effort by Google and HTC directly challenges other Android partners like Samsung, LG, and Huawei.
“We’re excited about the 2017 lineup, but even more inspired by what’s in store over the next five, 10, even 20 years. Creating beautiful products that people rely on every single day is a journey, and we are investing for the long run,” said Osterloh.
On the other hand, some analysts are skeptical about the quality of the deal primarily due to HTC’s long decline.
The Taiwanese firm has seen its market share plummet in the face of rivals Apple Inc, Samsung Electronics Co, and other Chinese competitors.
Ryan Reith, who is an analyst at IDC, said that HTC is already past its prime “in terms of being a leading hardware design house, mainly because of how much it has had to scale back over the years because of declining revenues.”
“Unless Google really wants to control hardware for its other businesses like Home and Chromebooks in addition to smartphones, then I don’t see this as being a bet that pays off,” said Reith.
Jake Saunders, an analyst at ABI Research in Singapore, said that HTC can design and produce innovative products but “it lacks the deep pockets of the likes of Samsung for marketing promotions and saturation advertising.”
“For Google, HTC is a completely different deal than Motorola. It needs better control over manufacturing if it expects the Pixel series to compete with iPhones someday” said Jason Low, a Canalys analyst.