In a move to become a more serious player in the premium smartphone market, Google has reached a US$1.1 billion deal with HTC to bring more of the team working on its Pixel smartphones in-house.
HTC said the transaction primarily involves transferring certain HTC employees to Google. Many of the employees being transferred have been working with Google on the Pixel smartphones, HTC said.
The phones – the Pixel and Pixel XL – first debuted about a year ago, and Google is expected to unveil successor models in early October. HTC has served as the contract manufacturer for the phones.
HTC will continue producing its own phones following the deal with Google.
"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," HTC chief executive Cher Wang said in a news release.
Google is "continuing our big bet on hardware" with the deal, said Rick Osterloh, senior vice president for hardware, in a blog post.
"We’re excited about the 2017 lineup, but even more inspired by what’s in store over the next five, 10, even 20 years," Osterloh said. "Creating beautiful products that people rely on every single day is a journey, and we are investing for the long run."
The move suggests that Google is pursuing the sort of vertical integration that has helped make Apple successful in the premium smartphone market.
Apple's control of all aspects of production of its iPhone line has generated a number of benefits for the user experience of the phones. With the hardware team under Google's umbrella, the company – which is behind the Android operating system – could be nearing an Apple-like level of control over the development of its Pixel phones.
HTC said the deal will transfer 2000 employees to Google, which represents about half of HTC's R&D staff.
Google will also receive a license to HTC intellectual property as part of the deal.
The acquisition is expected to close by early 2018, HTC said.
The move comes just as Apple is about to begin shipping its iPhone 8 and iPhone 8 Plus smartphones on Friday, and is gearing up for the debut of the iPhone X, a redesigned model with a large edge-to-edge display and other changes, in November.