Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) is finally getting serious about making smartphones again. The company recently announced it will pay $1.1 billion for HTC Corp.’s (OTC:HTCKF) division that develops its Pixel smartphone.
As part of the all-cash deal, Alphabet will also hire HTC’s 2,000 employees and acquire a non-exclusive license for HTC’s intellectual property. No manufacturing assets are being acquired as part of the deal.
Alphabet is focusing its attention on Apple’s (NASDAQ:AAPL) model. While it has complete control over its Android OS, it was never able to make a phone exactly the way it wanted, with the hardware it wanted, and with the processor it dreamed of. The reason is simple; it never had 100% control over the hardware engineering.
So in following Apple’s footsteps, Alphabet aims to take total control over every aspect of its smartphones. And when I mean every aspect, I mean every aspect.
Because it’s not just the hardware design that the company wants to have complete control over, it seems it might also want to make its own processors.
Very few took notice a while ago when the company hired Manu Gulati, an AAPL chip architect veteran. Gulati announced his new job on his LinkedIn profile, with his professional title being Google’s Lead SoC Architect. According to sources, GOOG wants to build its own chip for a future version of its flagship Pixel phone.
GOOG has been rumored to want to make its own silicon since 2015. So both the purchase of HTC assets and hiring Gulati should not be much of a surprise. I am however surprised it took the company two years to get the process started. I honestly expected the company to have its own processor chip and a 100% GOOG engineered smartphone already.
There is money to be made in hardware, just ask Apple
And the reason Alphabet might want to have complete control over every aspect of the hardware is simple, there is a lot of money to make in hardware as Apple has proven.