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Why Google is spending $1.1 billion to ‘acqhire’ 2,000 HTC engineers

Phones, today. But tomorrow ...

Google hardware SVP Rick Osterloh speaks onstage at a Pixel phone event.
Google is betting that its hardware boss, Rick Osterloh, can do something big.
Ramin Talaie / Getty

Google is paying Taiwanese smartphone maker HTC $1.1 billion to hire about 2,000 of its engineers, plus to license some of its intellectual property.

Why is Google making another big bet on hardware? Especially after its experiment buying — and selling — Motorola wasn’t a big success?

The big picture:

Hardware is obviously still important to Google — and can be a great business.

Google has been trying to push the limits on Android hardware for years, first under its Nexus partnerships and more recently with the Pixel, a phone that Google and HTC made together last year.

Why should Google cede the high end of the handset market to Apple — which dominates the industry’s profits — by default? Google can now really, truly make the best Android phone by tightly integrating hardware, software and services. And, if successful, it could eventually join Apple in profiting hundreds of dollars per device sold — not just the smaller amount it makes from search ads.

Phones are today’s focus, but what’s next matters more.

While HTC is keeping its Vive VR business, it doesn’t take much of an imagination to think of things that smartphone hardware engineers could be asked to work on.

What comes after the smartphone? Augmented reality or “mixed reality” glasses? AirPods-like earpieces? Wearable sensors? Implanted devices? All of the above? It’s increasingly clear that Google’s parent company Alphabet won’t be leaving this problem up to its Nest subsidiary to solve. Google must play a leading role in the next wave, or it will lose relevance.

Meanwhile, HTC needed to do it.

HTC’s market share has been in decline as Samsung has swallowed the mid- to high-end of the Android market, and its stock price has reflected this reality.

Meanwhile, the only real remaining attempt at an operating-system competitor to Android, Microsoft’s Windows Phone — for which HTC once represented 80 percent of the market — has vaporized.

It might be a little weird that Google is going to increasingly compete with its Android partners, but they don’t really have options, either.


This article originally appeared on Recode.net.