Google Buys HTC’s Pixel Team

Article By : Dylan McGrath

Search engine giant makes second major foray into smartphones.

AN FRANCISCO — Google will pay $1.1 billion in cash to acquire HTC's Pixel smartphone operations, including employees and intellectual property, in a deal that represents Google's second major foray into the smartphone business following its brief ownership of Motorola Mobility.

HTC has served as the contract manufacturer for Pixel, the Android phone Google introduced last October. Pixel and Pixel XL were designed and developed by Google and not based on any existing HTC device, according to Google.  

Ryan Reith, vice president of mobile device tracking at market research firm IDC, said he didn’t see the logic in the deal from Google’s perspective. “I don’t see why you would want to bring that [manufacturing capability] in house,” Reith said.

Under the terms of the deal, about 2,000 HTC employees — most of whom were already working on the Pixel smartphone — will join Google. Google will also receive a non-exclusive license to HTC intellectual property involved, HTC said. The deal is expected to close early next year.

The acquisition comes a little more than a year after Google created its own internal hardware division to house products including Pixel phones as well as Google Home, Chromecast and others. As part of that initiative, Google hired David Foster, formerly the head of Amazon’s hardware group, to serve as head of Google’s hardware group last October. Google plans to unveil its second generation of “Made by Google” products on Oct. 4.

In a blog posting Thursday (Sept. 21), Rick Osterloh, senior vice president of Google’s hardware division, said the HTC employees joining Google have already been working closely with Google on Pixel. Osterloh added, “we’re excited to see what we can do together as one team.”

HTC, which for years was one of the top suppliers of handsets, has in the past four or five declined precipitously, Reith said. He said HTC has been shopping itself for a couple of years and that a lot of the firm’s top smartphone engineers have departed.

Speculating, Reith said, “The only thing I could come up with is that they want to control some level of hardware and turn that away from just phones,” Reith said. There are any number of firms with experience making Android phones that would be happy to serve as Google’s smartphone manufacturer, Reith said. For other products such as smart home products such as Google Home, that contract manufacturing supply is not as well established, he added.

Prior to the Pixel, HTC also worked with Google on other Google-branded handsets, including the Nexus One in 2010 as well the Nexus 9 tablet in 2014.

In 2011, Google paid $12.5 billion for Motorola Mobility. It sold most of Motorola Mobility — minus about 2,000 patents and some engineering staff — to Lenovo for about $2.9 billion in 2014.

— Dylan McGrath is editor-in-chief of EE Times.

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