20 May 2019
Google is expected to boost the quality and production volume of Pixel phones following its acquisition of an HTC unit. Photo:
Google is expected to boost the quality and production volume of Pixel phones following its acquisition of an HTC unit. Photo:

What the HTC deal can do for Google

Google last week announced a US$1.1 billion deal to acquire part of HTC’s smartphone assets in an apparent bid to strengthen its hand in competing with Apple.

In May 2016, Google created a new hardware division and launched Pixel phones and Google Home, while outsourcing the manufacture of Pixel phones to HTC.

The acquisition of HTC’s contract manufacturing division can be seen as the tech giant’s move to step up its game in the hardware arena, especially smartphones.

The smartphone market can be divided into iPhones and non-iPhones. Phones using the Android operating system developed by Google account for more than 90 percent of non-iPhones.

Google may not regard the making of mobile phones as an important source of earnings, but hardware is key to winning over Android users.

When buying an iPhone, a customer will naturally use Apple’s software services such as iCloud, App Store, Apple Maps and Siri, instead of the alternative services provided by Google.

As such, Google wants to become a hardware company to lure high-end customers.

Its Pixel phones have been well received by the market, and various media outlets have given it higher marks than iPhone 7. However, Pixel phones have failed to make a major impact because of limited production.

After the HTC deal, Google is now able to expand its production capacity and upgrade its technological capability with direct control over the business.

Google’s senior vice president Rick Osterloh said in a press conference in Taiwan that he has been impressed with the company’s cooperation with HTC over the last one and a half years.

Taiwan is noted for its OEM manufacturers such as Foxconn, Pegatron, Quanta and HTC. These leading OEM manufacturers have accumulated over three decades of technical expertise.

They are good at catering to the safety and environmental protection standards of the West while tapping the labor force on mainland China.

Interestingly, Google intends to integrate the 2,000 HTC engineers into its team and make them official “Googlers”.

However, the deal won’t involve any of HTC’s management or mid-level managers, who will stay with HTC and be redeployed to the VR division.

It’s quite clear that Google is merely interested in HTC’s front-line engineers to maintain a flat organization.

This article appeared in the Hong Kong Economic Journal on Sept. 22

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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