Google strikes $1.1bn handset partnership with HTC

James Pearce
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Deal will see Google acquire HTC's Pixel division as part of the software giant's latest investment in smartphone

Google has struck a $1.1 billion with Taiwanese smartphone manufacturer HTC to acquire the team working on its Pixel range of devices.

The deal will not see the software giant, part of Alphabet, take a stake in HTC, but will see the team who builds the Pixel range – around 2,000 members of staff – join Google.

It is Google’s second major foray into the smartphone market through an acquisition, after it bought Motorola Mobility for $12.5 billion in 2012, only to offload the unit to Lenovo for less than $3 billion just two years later.

Google owns and runs the world’s biggest smartphone operating system, Android, with around an 85% share of shipments in Q1 2017, according to IDC. Last year, it began shipping a new range of handsets, the Pixel range, which was built by HTC.

In a blog post, Rick Osterloh, Google’s SVP of hardware who joined from the Motorola deal, explained the logic behind the agreement.

“With this agreement, a team of HTC talent will join Google as part of the hardware organization,” he said. “These future fellow Googlers are amazing folks we’ve already been working with closely on the Pixel smartphone line, and we're excited to see what we can do together as one team. In many ways, this agreement is a testament to the decade-long history of teamwork between HTC and Google.”

The deal also gives Google non-exclusive access to licenses for HTC’s intellectual property, and builds on a long-running relationship between the two companies. HTC was the first manufacturer to release an Android device, the HTC Dream, and has worked closely with the software firm ever since.

The deal will also provide a major investment boost for HTC, which has been struggling over the last few years. Once a behemoth in the smartphone market which sold one in 10 of all smartphones globally, HTC has seen its market share dwindle amidst stiff competition from Samsung, Apple, and new Chinese vendors such as Huawei. Now, it has just 0.9% of all smartphone sales, from a peak of 8.8% in 2011, according to IDC.

Cher Wang, chairwoman and CEO of HTC, said: “This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and VIVE virtual reality businesses. We believe HTC is well positioned to maintain our rich legacy of innovation and realize the potential of a new generation of connected products and services.”

The deal is subject to regulatory approvals, but Google and HTC said it expects the agreement to close by early 2018.