Emerging: Google backs HTC smartphone unit with $1.1 billion investment

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Google has announced a $1.1 billion investment in smartphone development through a deal to buy part of HTC, showing it is still determined to develop handsets as well as its Android software.

The U.S. online giant will obtain the part of the Taiwanese group that already develops Google’s Pixel smartphone, taking on 2,000 of HTC’s employees though no manufacturing assets.

The deal demonstrates Google’s commitment to carving out a space in the smartphone hardware market, despite previous setbacks and the dominance of Samsung and Apple.

In the first quarter of 2017, Samsung had 23.3 percent of the world’s market share, while Apple had 14.7 percent.

IDC: Smartphone Vendor Market Share Chart

In early 2016, Google hired HTC’s Rick Osterloh to spearhead its hardware development drive.

In a blog post published today, Osterloh said that Google will obtain some of HTC’s intellectual property as part of the deal.

Both companies have committed to further collaboration in the future.

Key Context

  • Alphabet, Google’s publicly listed parent company, released the Pixel smartphone a year ago. It currently accounts for less than 1 percent of the smartphone market as hardware despite the global domination of Google’s free Android mobile software.
  • In 2012, Google invested $12.5 billion in Motorola. The deal gave it patents and other assets but the takeover didn’t gel into a hardware powerhouse and remaining elements of Motorola were sold to Lenovo for less than $3 billion two years later.
  • Samsung and Apple control the largest portions of the global smartphone market. According to industry tracker IDC, Samsung sold 111 million units in 2016 compared to Apple’s 210 million, though the South Korean conglomerate pulled ahead in terms of market share earlier this year.
  • On 12 September, Apple unveiled its latest model, the iPhone X.
  • On 4 October, Alphabet is expected to launch two new Pixel models and a new Chromebook.
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