Apple shouldn't worry about Google's $1.1B HTC deal just yet

Despite the failure of its 2012 Motorola takeover, Google made another big investment in its long term smartphone strategy Thursday, acquiring a division at Taiwanese manufacturer HTC in a $1.1 billion deal.

The “big bet” on hardware sees Google gain 2,000 engineers from struggling HTC as well as the non-exclusive use of some of the firm’s intellectual property.

The engineers, many of whom already work on Google Pixel devices, will stay in Taiwan and not move to the U.S. company’s headquarters in Mountain View, California.

HTC said it would continue to produce phones, including a new flagship model, and remains committed to the development of its Vive virtual reality headset.

Google will reveal its latest devices at the “Made by Google” event in San Francisco next month, including a smartphone made in collaboration with HTC.

Google is already a major player in the smartphone market; it’s Android software runs on 85 percent of all new devices.

Google’s previous foray into the hardware market was a questionable flop. It acquired Motorola for $12.5 billion in 2012, before selling it two years later to Chinese PC manufacturer Lenovo for $2.9 billion.

Google reset its smartphone hardware strategy last year, launching the critically acclaimed Pixel line. But an inability to scale manufacturing meant they sold in small numbers.

Some technology watchers had predicted a more dramatic HTC takeover — including its manufacturing plants — as a way to compete with Apple and Samsung, however by acquiring the smartphone-savvy talent — along with a few patents — Google has done little to change the hardware market dynamic.

Rick Osterloh, Google’s head of hardware, posted a blog announcing the deal. He said it was part of Google’s “continuing big bet on hardware” and that it was “investing for the long run.”

Reacting to the deal, Benedict Evans, a former telecoms analyst who now works at Silicon Valley VC firm Andreessen Horowitz, said Google would need to make a more sizeable investment in order to compete with Apple or Samsung.

“A few years ago Samsung was spending $10billion a year on marketing handsets. Would Google go to war?” Evans tweeted.

Unlike Apple, which makes most of its money from hardware, Google’s approach is to make money from being everywhere. If Google changed this approach — to making money from devices — it would undermine the companies who build and sell over a billion Android smartphones every year. It is unclear if Google is willing to do this.