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Google to acquire part of HTC’s smartphone biz for $1.1 billion

Google has signed an agreement with HTC Corporation worth $1.1 billion, which will see a group of HTC employees – mostly from the team that has been working with Google for nearly a year on the Pixel smartphone line – join Google. As part of the agreement, Google will also get a non-exclusive license for HTC intellectual property. The search giant will also be investing in Taiwan “as a key innovation and technology hub.” This agreement is currently subject to regulatory approvals and customary closing conditions, and is expected to close by early 2018.

Over the past year Google has steadily increased focused on its hardware business. The company’s senior vice president – hardware said in a blog post that:

It’s still early days for Google’s hardware business. We’re focused on building our core capabilities, while creating a portfolio of products that offers people a unique yet delightful experience only made possible by bringing together the best of Google software—like the Google Assistant—with thoughtfully designed hardware. HTC has been a longtime partner and has created some of the most beautiful, high-end devices on the market. We can’t wait to welcome members of the HTC team to join us on this journey.

Google had launched its flagship smartphones Pixel and Pixel XL, which were manufactured by HTC, in October last year. The Pixel devices have been designed end-to-end by Google, unlike the Nexus devices for which Google had outsourced the design part to manufactures. As such Google has complete control on what goes into building the hardware, and features offered in these devices. These smartphones were not the first Pixel devices – Google had previously launched the Chromebook Pixel and the Pixel tablet. This latest agreement with HTC is a natural progression for the company and will provide it a realistic shot at competing with Apple’s iPhones.

Plans for the hardware biz

During the company’s Q1 2017 earnings call, Google CEO Sundar Pichai had said that Pixel and Google Home products had seen “strong growth”, but didn’t disclose any specific numbers for the hardware business. “Sales continues to be strong, and we are actively working to bring these great devices to more people around the world,” Pichai said. He also pointed out that the Android ecosystem was seeing an upsurge in emerging markets, with 300 million smartphones with the OS being sold in Brazil and India last year.

Google is relatively a late entrant in the hardware space, unlike its competitor Apple. With the Pixel line of phones, tablets and Chromebooks, the company made its first step into manufacturing consumer electronics. Before this, Google’s only foray into consumer manufacturing was its Nexus phones, which it made in partnership with established manufacturers. In fact, Google had decided against manufacturing its own smartphones, and had outsourced the designing part so as not to alienate manufacturers from building Android devices. Its Google Home smart speaker is a competitor to Amazon’s Alexa. Neither of these devices is available globally yet.

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The company also hopes to double the number of Android Wear smartwatches released this year. “Thanks to partnerships with major brands like TAG and Fossil, there’ll be more than 20 different Android Wear watches available this year,” Pichai said, adding that LG was releasing two flagship watches with Android Gear 2.0.

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