US search giant Google will acquire Taiwan-based HTC’s R&D team that develops the Pixel smartphones for $1.1 billion.

Under the deal, half of HTC’s R&D team of 4,000 will join Google.

Notably, the deal does not give Google access to HTC’s Vive VR business. In fact, at a press conference today at HTC’s headquarters in Xindian, New Taipei City, the company said it remains committed to its own products, including smartphones and Vive, and will continue developing them even after 2,000 HTC employees—nearly a fifth of its current staff—move to Google as part of the deal.

Many of the HTC employees in the “Powered by HTC” R&D division already work with Google on Pixel smartphones.

Google also will receive a non-exclusive licence for HTC’s intellectual property. The transaction, subject to regulatory approvals, is expected to close by early 2018.

Cher Wang, HTC chairwoman and CEO, said: “This agreement is a brilliant next step in our longstanding partnership, enabling Google to supercharge their hardware business while ensuring continued innovation within our HTC smartphone and Vive virtual reality businesses.”

Analyst reaction
Initial reaction to the deal from analysts was mixed. “Google is not a hardware company and nor does it want to become one, but hardware is an increasingly important conduit for its services,” noted CCS Insight’s Geoff Blaber. “As computing, AI and search become pervasive, Google needs to ensure that it can deliver its services as seamlessly and broadly as possible. That requires deeper involvement in hardware.”

However, he claimed it isn’t Google that is the ultimate victor here.

Canalys’ Tim Coulling believes Google had no choice but to strike the deal:

Meanwhile Radio Free Mobile’s Richard Windsor noted that this will represent Google’s fourth major hardware related transaction that started with Motorola Mobility and continued with Nest and Dropcam. “Google has yet to show any sign that it has learned from the mistakes but better late than never,” he wrote.

Shares suspended
Amid speculation that Google was planning a takeover of the troubled device vendor, HTC yesterday issued a release stating its shares will be suspended from trading as of today (21 September).

Taiwan media first reported that Google was eyeing HTC’s smartphone unit, or a move to take on its R&D business, earlier this month. The news followed speculation that HTC was looking to sell off its VR business Vive in a bid to raise funds, or could even look to sell the entire whole company.

In August HTC reported a massive drop in sales, which heightened speculation.

Once a prominent player in the smartphone market, HTC has notably struggled to compete with market leaders Apple and Samsung in recent times, and the situation has reportedly been worsened by slowing sales of its most recent flagship – the U11 smartphone.

For Google, the deal will further step up its ambitions in smartphone hardware, after it launched its Pixel devices last year.