Date
19 July 2019
Google appears to be scaling down its hardware group, including the staff involved in the Pixelbook laptop computer operation. Photo: Bloomberg
Google appears to be scaling down its hardware group, including the staff involved in the Pixelbook laptop computer operation. Photo: Bloomberg

Google takes a relook at its hardware business

Despite being a relatively insignificant player in the hardware arena, Internet giant Google has never hidden its ambition to carve out a place for itself in the fiercely competitive segment. In the past few years, the company launched several hardware products including smartphones, tablets, speakers and laptop and desktop computers. However, those gadgets failed to achieve meaningful traction in the market, prompting questions about the firm’s strategy.

Having made some mistakes, the US tech giant now appears to be going into a pause mode with regard to the business, with a possible restructuring underway.

On Wednesday, Business Insider reported that Google has told dozens of employees in its laptop and tablet division to find new roles in other departments of the company, a move that means scaling back of operations of the in-house hardware group.

The overhaul involves the “Create” division, which is responsible for developing and manufacturing the Pixelbook laptop and Pixel Slate tablet and other “Made by Google” products.

While the employees are being shunted to other departments, a message has been sent out that their new roles may be only temporary, and not permanent, according to the report.

That suggests that Google wants to be in a position to fall back on the talent should it decide to resume its hardware push after a review.

By keeping them on the rolls, rather than firing them, the company will have the flexibility to boost the hardware manpower if needed in the future.

Still, the move raises questions about the extent of Google’s commitment to building its own line of laptops and tablets, a fiercely competitive market with thin profit margins, Business Insider noted.

There is, of course, good reason why Google would want to take a relook at its hardware operations, given the limited success it has had in the segment. 

The company had sought to provide a range of devices, from smartphone to tablets to laptop computers, to allow people to have the best experience while using Android operating system on the go. However, apart from Pixel brand smartphone, which won over a group of loyal Android fans, the tablet and laptop computers failed to gain much mainstream adoption.

Pricing is one area where Google seems to have gone wrong in its hardware offerings. 

 

A Pixelbook running on Chrome OS costs users US$999 each, while a Chromebook from Taiwan PC brand ASUS is priced as low as US$229. Looking at most of the other brands, the Chromebooks start at a price below US$500.

The high premium in pricing has meant that Google found it difficult to market its Pixelbook against other brands that deploy the same software. The pricing was off especially given the fact that Google does not have a strong loyal fan base for its gadgets, unlike the case with, say, Apple.

As it rejigs its strategy, Google may find that it needs to focus on select hardware products to integrate them with its service offerings, rather than make products that will be pitted against lower margin rivals. It should concentrate on devices such as the Google Home voice assistant speaker, rather than spread its efforts thin on a broad swath of gadgets.

Google Home is now the No. 2 voice assistant service with around 22 percent of overall share in the US market, trailing Amazon which holds more than half the market share with its Echo devices. The gap between Amazon Echo and Google Home is huge, but it is interesting to note that the Google device is said to have added more new users last year than the Amazon offering.

According to a research report, Google Home smart speakers added 7.2 million new US users in 2018, 600,000 more than Amazon Echo.

Investment bank RBC estimated that about 43 million Google Home devices are now installed in the US and 9 million internationally. Such figures demonstrate that smart speaker could be one of the growth engines for Google hardware business as it is deeply integrated with users’ daily lives.

In 2017, Google announced the acquisition of Taiwan firm HTC’s smartphone design division to help support Google Pixel smartphone development. Its first series Pixel 3 had been launched late last year and won positive market response. However, Google did not make Pixel 3 a global product and it was just limited to certain markets. That shows Google is yet to find out a way for its smartphone business outside its home market.

As Google Pixel 3 still features the original Android experiences, it would be quite difficult for the company to compete with dozens of brands in the market that offer Android smartphones for all market segments. Given this situation, Google may find wise to limit its smartphone operations to avoid making loss.

The company has signaled now that it wants to reexamine its overall hardware operation and do some course correction. As it pares back the laptop and tablet division, it will confront this question: can it come up with the right mix and scale for the segment?   

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RC

EJ Insight writer

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