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Motorola redux? Google appears set to buy HTC

Google might buy a dying Android OEM again.

The all-glass back of the HTC U11.
Enlarge / The all-glass back of the HTC U11.
Ron Amadeo

Evidence is mounting that Google is going to buy HTC. Bloomberg's Tim Culpan is reporting HTC shares will halt trading tomorrow pending a "major announcement" from the company. The speculation is that the struggling smartphone and VR headset company is going to be sold, and further speculation suggests the buyer is Google.

The "Google to buy HTC" rumors have been churning for some time. The local Taiwan media has been reporting whispers of talks between the two companies since the beginning of September, and one site, Apple Daily, is reporting that the sale is already a done deal.

So what would Google want with HTC? Any tech watchers' mind should immediately jump to the last time Google bought a failing Android OEM: its acquisition of Motorola. Along with a ton of patents, Google got a bunch of factories dedicated to producing smartphones and other products. It sold off the parts it didn't want, like the cable modem business, and then it set about whipping Motorola into shape. After clearing the 18-month product pipeline the old Motorola execs left in place, Motorola under Google turned into one of the better Android OEMs out there, offering stock Android, fast updates, and a simple lineup of about three main phones across the pricing spectrum. Google eventually got rid of Motorola, though, probably as a result of negotiations with other Android OEMs.

Google's HTC acquisition would again result in the company owning a bunch of factories. So does it just bring Pixel production in-house? Google now has a formal "Hardware" division, run by former Motorola CEO Rick Osterloh, and the company has been pumping out hardware like the Pixel, Google Home, Google Wifi, Chromecast, and the Daydream VR viewer. If it bought HTC, the group would actually have its own factories. The "Vive" team is now a wholly owned subsidiary of HTC and seems gift-wrapped for a potential buyer.

Currently, Google's Pixel line brings great software to the table, with things like a highly optimized version of stock Android and the Google Assistant, but there's not much of a focus on hardware. The 2016 Pixel was built by HTC and looks just like an HTC phone. The 2017 Google Pixel 2 XL is being built by LG and looks a lot like an LG V30. Other than the glass window on the back, there isn't much focus on making hardware that stands out. If Google does acquire HTC's factories, it could start more deeply customizing what its phones look like, because right now Pixel phones look like they are made from off-the-shelf parts from other manufacturers.

While we haven't seen the results hit the market yet, Google has seemed more interested in hardware lately. Rumors have also suggested Google is interested in creating its own SoCs, and the company now has a position called "Lead SoC Architect," filled by Manu Gulati, a former chip architect at Apple. On stage at I/O, Google suggested future phones would come with special processors dedicated to machine learning. Without an HTC purchase, Google would have to get a third party to use these new chips, but if it buys HTC, it can quietly work on integrating these new chips into an actual product.

HTC's struggles have been well documented and ongoing. The company peaked in 2011 with a mix of Android and Windows Mobile phones but never managed to recover once Windows Mobile died and Samsung swallowed up much of the high-end Android market. HTC spent several years making boring flagships with little design growth and botched marketing. The company eventually tried to transition away from the smartphone market, investing in a fitness band (which never actually launched) and a weird, viewfinder-less camera.

HTC's only real success has come from partnering with other companies. With Valve, it created the HTC Vive VR headset, one of the first good VR headsets on the market (along with the Oculus Rift). It also partnered with Google to create the Google Pixel smartphone, which has consistently been hailed, at Ars and other places, as the best Android phone on the market. While these products were critical successes, they sold in low volumes and are not the kind of successes that can keep HTC afloat. HTC doesn't even have much to do with the success of either product. Valve owns all technology that makes the Vive work. The Pixel is only good because of Google's software optimizations, and this year it added LG, a competing hardware company, to the program. Google and Valve both seem like they just needed a manufacturer, and HTC was desperate enough to make other companies' products.

This all seems like something Google has done before, but, remember, that's kind of Google's thing. It wanted to sell smartphones directly with the Nexus One program, then it didn't. Then it bought Motorola and started making its own smartphones, then it decided it didn't want to do that anymore. Now it's starting up again with the Pixel program, and maybe it wants to get even more involved with hardware.

Whatever HTC's announcement is, it's coming sometime Thursday, so we'll keep our eyes peeled.

Channel Ars Technica