HTC said many of its estimated 2,000 employees affected by the deal were already working with the search giant on smartphones. Google leaned on HTC to manufacture its first Pixel smartphone, which was released last year, and is working with the company to produce the next version of the phone, which is expected to be announced on Oct. 4.
Bringing on the team from HTC is a sign that Google is doubling down on plans to produce its own hardware. Company executives have said it is important to tightly couple its artificial intelligence software, like the voice-controlled Google Assistant, with a range of devices.
Apple has followed a similar strategy for years, and that has provided the iPhone maker with an easier path when adding new features, such as augmented reality functions, since it designs nearly all of the internal parts of its phone.
Rick Osterloh, Google’s senior vice president in charge of hardware, said in a blog post that the HTC deal was a continuation of “our big bet on hardware.” Google also offers a smart speaker, the Google Home, and the Chromecast streaming video device. Continue reading the main story
The two sides did not disclose how many engineers and other key employees would head to Google as part of the deal. But Peter Shen, HTC’s chief financial officer, said the remaining company would still have more than 2,000 research and design staffers, down from about 4,000.
As part of the agreement, Google will also secure a nonexclusive licensing deal for some of HTC’s intellectual property.
HTC said it will continue to make its own smartphones — including a new premium model — although it plans to streamline its handset portfolio. By acquiring the HTC engineering group that had already been working with the company, Google secured hardware talent without taking on expensive assets, like manufacturing facilities.
The deal marks a reversal for Google. The company abandoned its plans to own a smartphone manufacturer when it sold Motorola to China’s Lenovo Group for $2.9 billion in 2014, less than three years after acquiring the handset business for $12.5 billion.
But Google, which makes the Android operating system for smartphones, retained many of Motorola’s patents — an important asset to fend off potential intellectual property lawsuits from Apple.
As the Android software world has become dominated by Samsung Electronics, Google has wanted more say in the manufacturing of the phones that use its operating system. Currently, most of Google’s smartphone software runs on devices manufactured by companies like Samsung and LG Electronics, and Google has only a limited say in what those companies produce.
With the introduction of the first Pixel smartphone last year, Google said it was creating the smartphone it had always intended to build. Google took control of the entire development process of the device, from the industrial design to the procurement of components. The Pixel received positive reviews, but it hasn’t made much of a dent in the smartphone market.
HTC was an early leader in smartphones. But it has struggled against more popular competitors while trying to fend off pressure from low-end Chinese manufacturers. Its decline is another indication of the challenges facing many smartphone manufacturers, who are struggling to make profits while competing against Apple and Samsung.
Operating losses piled up at HTC in recent years, forcing it to slash research and marketing spending, exacerbating the challenge of keeping pace with the bigger companies. HTC said it will continue with its virtual-reality business centered around its Vive VR headsets.
Google and HTC have a long history of working together. HTC sold the first smartphone to run Android software, in 2008, and it produced Google’s first-generation Nexus smartphone — the predecessor to the Pixel.
The transaction is scheduled to close, pending regulatory approval, in early 2018.
