Google is serious about manufacturing its own hardware…again.
Google will reportedly buy HTC’s smartphone operations and intellectual property in a move that foreshadows that it is serious about integrating software and hardware and selling premium devices on multiple fronts.
The purchase of HTC’s division isn’t likely amount to much–HTC is valued at $1.9 billion–but Google would acquire a supply chain, research and development and skills that would be hard to create in-house. HTC has already halted shares pending an announcement.
If this HTC deal sounds vaguely familiar that’s because it was only a few years ago that Google bought Motorola for $12.5 billion and then offloaded it to Lenovo for $2.91 billion. The Motorola purchase had a lot to do with hardware knowhow, but more to do with defending patent lawsuits.
What’s different this time? Frankly, I’m not so sure. Google probably realizes hardware is a conduit for its artificial intelligence, ads and Android. Cue the Amazon Alexa envy. But that reality doesn’t mean Google can integrate HTC well or even keep the talent.
HTC and Google have been strong partners. HTC is a supplier for Google’s Pixel line. What’s unclear is whether HTC can continuously offer premium hardware that can serve as a showcase for Google’s services. HTC’s sales have crumbled since peaking in 2010.
Add it up and Google will face its challenges with HTC. Then again, Google is throwing a financial lifeline to one of its key hardware partners.
Here’s how the ledger looks:
Why buy HTC
- HTC provides a supply chain and manufacturing expertise. HTC, which has roots as a third party contract manufacturer, would know how to ramp up other product lines such as Google Home and may even play a role for Nest down the line.
- The price isn’t that bad. You could argue that Google would have had to spend what HTC was worth anyway just to come close to being a hardware player.
- Google can have a tighter hold on Android. Sure, Lenovo, Nokia and HTC promise that they will keep up with Android and refrain from customizing the mobile OS too much. But the biggest player–Samsung–won’t play that game.
Why HTC is a dumb purchase
- HTC isn’t selling out to Google from a position of strength. HTC’s wearable strategy hasn’t panned out. HTC Vive is promising on the virtual reality front, but is massive. And HTC hasn’t been a smartphone leader of late.
- Google likely hasn’t learned from its Motorola experience. To make HTC truly work, Google will have to bridge cultural divides. Google couldn’t make Motorola work so it’s unclear whether it’ll have any more luck with HTC.
- It’s unclear how much innovation HTC will really bring to Google, which counts ads, artificial intelligence and computing scale as its core competencies. Google may be limiting its Pixel designs by limiting its partner choices to HTC.