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Google’s HTC move borrows from Apple’s playbook

Google’s HTC move borrows from Apple’s playbook

Google's US$1.1B acquisition of HTC’s smartphone arm is a recognition that to make top devices, you need control over hardware and software, like Apple

Google's US$1.1 billion acquisition of HTC's smartphone engineering arm is not a direct assault against its chief rival, Apple. But it is a recognition of Apple's successful strategy.

It is also an acknowledgement that an ecosystem dominated by hardware manufacturers and telecom providers – each with a set of priorities and plans that doesn't dovetail with Google's – results in a myriad of devices that run the gamut of quality.

With that in mind, Google's buyout of HTC's engineering IP will enable it to create a pure Android play by marrying hardware and software in a move that could eventually reduce fragmentation in the Android ecosystem.

HTC has acknowledged the deal with Google will affect about 2,000 of its own engineers, who help control the design of the of interior of a Google phone, and therefore can create better integration between cameras, sensors and processing chips from the likes of Qualcomm.

The resulting "flagship" smartphone will become a standard to which Google hopes other handset makers will aspire.

"It's the same thing Microsoft did with its Surface computer," said Frank Gillett, a principal analyst at Forrester Research. "They got impatient with the product [manufacturers] four or five years ago feeling like they didn't have strong enough flagship products to compete against the Apple Mac product line."

So, Microsoft designed its own hardware to establish what it thought would be the flagship Surface laptop and delivered the integration of hardware and software in a way only a vendor that controls both can do.

Microsoft has tried to separate its Surface hardware team from the software team so that Windows device manufacturers still feel they have a role.

"Microsoft is not trying to take over from all the OEM partners. They do compete with their partners there, but not for the bulk of the market. That's what I expect Google to do as well," Gillett said.

What Google doesn't get from the HTC deal is chip engineers, which it will likely need to acquire in a separate deal.

Android and iOS now account for 94 per cent of the mobile operating system market worldwide, according to Forrester Research's just-released "Mobile, Smartphone, And Tablet Forecast, 2017 To 2022." Android is the dominant platform for smartphones, capturing 73 per cent of the market with more than 1.8 billion subscribers in 2016.

Android is expected to maintain its lead this year, according to Forrester, with 74 per cent of the market, followed by Apple with 21 per cent and Windows Phone with just 4 per cent.

Android, however, has an image problem.

Device manufacturers play a key role in making phones and tablets more secure, and with a fragmented ecosystem where software upgrades are controlled by carriers, some updates have been known to be delayed for months.

"Android also has a problem in that the latest version of Android OS is generally a small portion of the base of devices in the marketplace," said Jack Gold, principal analyst at J. Gold Associates. "So, when upgrades are issued, not everyone gets them. Whereas, when Apple upgrades, everyone gets it."

Apple, which just this week rolled out iOS 11, has a unique relationship with telecom providers where it insists on controlling everything from application testing and device certification to OS updates. That way, when an iOS update or patch is released, it is immediately available to all devices that run the operating system.

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