Thanks to HTC, Google is closer to Microsoft today than Apple

Google confirmed today that it bought part of HTC, the smartphone maker that has been its partner since the first day of Android. In fact, it owns the 2000 employees that HTC had intended to develop the smartphones Pixel, a line that debuted last year and that is the closest that Google has come to have its own phone design. The second generation Pixel family will be presented on October 4, with a model made by HTC and another by LG. In the first generation, both models were manufactured by HTC based on the design of a smartphone company.

HTC is one-fifth of its employees but will continue to maintain its own line of equipment: the most recent is the U11, which like the previous received very good ratings that were not reflected in sales, which have been falling steadily since the peak of 2011 (with 43 million phones sold). HTC has nine consecutive quarters with sales losses and contraction. Although it does not yet have serious cash problems, the $ 1.1 billion that Google pays gives it air to continue with new smartphones and with the most lucrative market for virtual reality glasses (Live) where it is third in sales, ahead of Oculus Rift Facebook (leading Sony and Samsung, partly because of the lower cost of their proposals).

Google’s decision invariably leads to the failed purchase of Motorola by which Google paid $ 12.5 billion in 2011 and sold Lenovo by $ 2900 million in 2014. But there is a difference: at the time, Google maintained its original position (offering Android to anyone who wanted it) and did not want to give it privileges: Motorola had no visible benefit that could make the rest of the Android ecosystem angry. He did not run with the commissary’s horse; I did not have access to Android before the rest.

Since then some things have changed. The main one: Google today is a hardware manufacturer. Chromecast, Pixel notebooks, and tablets with Chrome OS, Home speakers, Daydream virtual reality goggles, Google Glass: all are designed within Google, in the division headed by Rick Osterloh, the executive who was at Motorola when made the purchase, which went to Lenovo when the company was sold, and returned to Google in 2016.

With the Pixel, introduced in October last year, Google gave a twist to the Nexus family, available since 2010. It was no longer a smartphone designed by a brand at will (HTC, LG, Huawei, Motorola) using pure Android provided by Google: now goes beyond, having interference in the hardware and firmware (ie, the code that gives life to the components on which the operating system mounts).

Pixel is more than Android phones as Google thinks: the company worked to include in them their image processing tools to work in conjunction with the camera; modified the software to make the interface agiler; and included in the applications that later came to the rest of the ecosystem, such as Google Assistant. And OS updates guaranteed for two years (the original Pixel should be able to be upgraded to Android P) and security patches for three years.

But the Pixels are almost impossible to get, they are sold in very few markets; less, even than the Nexus, which the manufacturers themselves were responsible for distributing.

With the entry of HTC engineers into Google’s offices, the company achieves a greater integration: it will have people who know how to build a phone from scratch, and they will – theoretically – exactly as Google wants; there will be no negotiation with another company to define a design. The original Pixel is based on the design of the HTC A9; will not be the case with the Pixel 3 (the second generation, which comes in two weeks, is finished a while ago).

Vertical integration

This vertical integration is the way Google has to target the high-end and show the best face of Android. Neither Samsung nor Huawei, the two largest manufacturers of Android on the planet do (Apple is between them, in quantity of phones sold); both companies modify the software, the user interface, “get in hand” (sometimes, for good); Samsung even shifts some services and replaces the Google assistant with Bixby himself (without much success so far); Huawei does the same in the US, which includes Amazon’s assistant Alexa on some models.

Does Google want to be Apple? No, nor can, at least in the short term. Apple designs all the software and, whenever it can, the hardware. And it’s not even that it chooses standard components of the market, as most of its competitors do: the iPhone 8 and X, for example, carry not only the CPU of its own design (the central chip that gives life to the phone) but also the first GPU itself, the graphics chip, and the whole system of facial identification, Face ID. Not a few are expected to do something soon with the modem, which today buys Intel and Qualcomm (with whom he has a harsh legal suit). And it secured yesterday the provision of memory chips made exactly to its measure when participating in the purchase of the semiconductor business of Toshiba for 18 billion dollars.

Google, by the way, also designs microprocessors, although its focus is, for now, artificial intelligence (also designs the servers of their computer centers). That is about to change, perhaps: in June it was learned that Apple’s chief processor design, Manu Gulati, was passed to Google; although not confirmed by the company, rumors indicate that it is working on the design of a chip for the Pixel. A veteran of AMD and Broadcom at Apple led the development of what are now the most advanced processors in the mobile market in terms of performance.

In addition to Apple, Samsung with its Exynos and Huawei with the Kirin are the companies that have more advanced the development of its own processors for smartphones; LG and Xiaomi go on a similar path. It is not only bad news for Qualcomm or MediaTek, the two giants of the category: having the design of a chip, although it is very expensive, allows to greatly improve the performance of a computer because the integration is much greater: it is a motor made to measure.

So what Google is doing is following, in its way, the path that Microsoft began to move in 2012 with the Surface line: competing with its business partners going to the less massive, but more lucrative, high-end segment. Microsoft also makes hardware and, in the case of computers, defines designs and features, and develops the necessary technologies to make it go a little further. Compete with other manufacturers but in limited quantities. And he tried it on cell phones, albeit with a resounding failure; in fact, many see in the payment of Google to HTC a rescue similar to that of Microsoft with Nokia.

But there ends the parallelism: Microsoft paid because there was no other: without Nokia, there was no one to make their phones. Google pays a lot less, and it does it to accelerate a process that is already underway anyway. And without worry: even if Pixel does not thrive a bit, it still has 85 percent of the smartphone market, which gives it ample scope to explore other segments while maintaining its two-dimensional, integrated vertical manufacturer, and as a (horizontal) software provider for multiple partners. Ideally next October 4 the company will explain a little more what are your plans for the Pixel family.


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