Should Alphabet Increase Its Control of Android?
HTC’s smartphone star dimming
Alphabet’s (GOOGL) Google agreed to acquire a team of hardware experts from HTC for $1.1 billion to bolster its own nascent hardware division. The experts joining Google from HTC include engineers whose work once put the Taiwanese company on the map as a top smartphone vendor.
At one point, HTC was responsible for one in ten smartphones sold globally. However, its star has dimmed in recent years amid stiff competition from Apple (AAPL), Samsung (SSNLF), Sony (SNE), and rivals from China (MCHI).
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Google needs to control Android more
For Google, the HTC veterans it is adding to its team could make a huge difference. Apple has a firm control of its iPhone business because it designs the hardware and owns the operating system, iOS. In contrast, Google owns the operating system, Android, but relies on partners to design devices that can bring out Android innovations. However, this partner arrangement has produced frustrations for Google, prompting the company to try to take control of Android’s direction by producing smartphones under its own brands.
If the acquisition of HTC veterans results in Google taking more control of Android, the company could be rewarded in several ways. By controlling both the hardware and software components of Android, Google could have more flexibility in enhancing the Android experience, leading to more revenue and profit.
Smartphone profits belong to Apple
Currently, whereas Android controls the largest share of the smartphone market, Apple captures most of the smartphone market. According to research company Strategy Analytics, Apple’s iPhones claimed 79.2% of global smartphone profits in 2016. Apple’s firm grip on smartphone profits can be attributed to its control of the iOS experience. Likewise, Google could bolster its smartphone fortunes by taking control of Android.