TAIPEI • Google has agreed to buy part of HTC's engineering and design teams for US$1.1 billion (S$1.5 billion), taking on a cadre of veterans that worked on the Pixel phone and could bolster its nascent hardware business.
Alphabet's Google is taking on some 2,000 employees with experience working on its signature Pixel devices meant to showcase the best features of the Android software that now power the vast majority of the world's smartphones.
The deal comes with a non-exclusive licensing agreement for HTC intellectual property.
Google now gains tighter control over the design and production of the Pixel and other devices, potentially helping sales.
Those gadgets are becoming the pillars of a strategic push to distribute critical software products like its voice-enabled assistant and better compete with Apple.
The search giant is preparing to unveil a second generation of devices next month, building on a portfolio that runs the gamut from Google Home speakers to Daydream virtual reality headsets.
"The end game here is more flexibility in hardware innovation, which can spur incremental revenue through services enabled by those innovations," said senior analyst Jitendra Waral of Bloomberg Intelligence. "Google essentially gets more control over its hardware design. It can help it accelerate innovation with its own products and use that as the benchmark for the Android ecosystem to follow."
Alphabet investors may be concerned about history repeating itself. In 2012, Google paid US$12.5 billion for Motorola Mobility, then a leading Android handset manufacturer. But in less than three years, Google sold it to Lenovo Group for less than US$3 billion, while keeping Motorola's valuable patent portfolio.
Owning Motorola had eroded the search giant's profit margins and upset other phone makers that relied on Android.
The HTC transaction, however, costs a lot less and comes at a very different time - when Google and its biggest rivals are more focused than ever on consumer devices built around new artificial intelligence and augmented reality services.