Google has confirmed it will buy HTC’s Pixel smartphone division in a $1.1 billion (£0.8 billion) deal to boost its hardware capabilities.
HTC will continue to run its remaining phone business and the deal will not involve the purchase of direct stake.
The Taiwanese firm made the hardware for Google’s first Pixel smartphone, launched in October 2016.
Google has confirmed it will buy HTC’s Pixel smartphone division in a $1.1 billion (£0.8 billion) deal to boost its hardware capabilities. HTC made the hardware for Google’s first pixel phone (pictured is its launch in October 2016)
Google has recently sought to beef up its hardware capability with deals and product launches, and last year hired Rick Osterloh, a former Motorola executive, to run its hardware division.
‘For Google, this agreement further reinforces its commitment to smartphones and overall investment in its emerging hardware business,’ Google said in a statement.
Under the deal, the internet giant will also receive a non-exclusive license for HTC’s intellectual property.
The transaction, which is subject to regulatory approvals, is expected to close by early 2018.
HTC is a long-time partner of Google and some analysts estimate that Pixel smartphones account for 20 per cent of HTC’s smartphone shipments.
But the Taiwanese firm, which once sold one in 10 smartphones globally, has seen its market share drop due to competition from Apple, Samsung and Chinese rivals.
Its sharp decline had some analysts questioning the wisdom of the deal.
‘HTC is 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 as because of declining revenues,’ said Ryan Reith, an analyst at research firm IDC.
‘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.’
The deal marks Google’s second major foray into smartphone manufacturing.
HTC’s latest handset, the U (pictured), has a radical ‘squeezable’ case that can be used to trigger commands. The feature had been rumoured to appear in the next version of Google’s Pixel, and the firm has bought HTC’s Pixel mobile division outright
The move could allow Google to build on the success of the Pixel handset, while allowing HTC to concentrate on more successful areas, such as its Vive VR headset (pictured)
It purchased Motorola Mobility for $12.5 billion (£9.3 billion) in 2012 and sold it off to China’s Lenovo Group for less than $3 billion (£2.2 billion) two years later.
‘It’s still early days for Google’s hardware business,’ Mr Osterloh said in a blog post.
He added the business is focused on bringing together the best of Google software and hardware for a suite of its core products.
Other hardware initiatives include its acquisition of thermostats maker Nest for $3.2 billion (£2.4 billion) in 2014, while product launches include voice-controlled speaker Google Home and virtual-reality device Daydream View.
HTC will continue to run its remaining phone business, meaning it will continue to produce its own models, such as the HTC U Ultra (pictured. The deal will not involve the purchase of direct stake
Google’s strategy of licensing Android for free and profiting from embedded services such as search and maps has made Android the dominant mobile operating system, with some 89 per cent of the global market, according to IDC.
But it has long been frustrated by the emergence of many variations of Android and the inconsistent experience that has produced.
Pushing its own hardware will likely complicate its relationship with Android licensees, analysts said.
HTC shares were on a trading halt on Thursday, and the stock has suffered steep declines over the past couple of years.
It has fallen 12 per cent so far this year and the company is worth around $1.9 billion (£1.4 billion).