Google is very close to buying HTC's smartphone business

Google may be close to buying the smartphone business of HTC, the troubled consumer electronics maker based in Taiwan, according to a press report.

According to a report in a Taiwanese publication (Google Translate version here), the two companies are in the final stages of acquisition talks. The report does not say how much Google may buy HTC for.

The deal would mark a surprise return to becoming a serious hardware player for Google, three years after it sold its Motorola smartphone subsidiary. And as Google invests more efforts into building its own in-house devices, like the Pixel phone, owning a smartphone subsidiary could help it mount a stronger challenge to Apple's iPhone.

A note from UBS on Thursday, citing the Commercial Times news article, says that the deal would only involve HTC's smartphone R&D team.

A Google spokesperson declined to comment, but didn't deny the report. An HTC spokesperson declined to comment.

The Commercial Times article did not cite a price for the acquisition, but UBS said it expected that a deal would be immaterial to Google-parent company Alphabet's financials.

Among the potential benefits of the deal, UBS said: "Deeper integration of hardware/software would offset some of the Android fragmentation issues that do not plague Apple iOS."

Shares of Google parent company Alphabet were unchanged in after hours trading on Thursday.

History repeating itself

According to a Bloomberg report last month, HTC has been exploring its options as its smartphone sales dwindle and its VR headset business struggles to take off. One option on the table was to spin out the VR division and sell the smartphone business, according to the report.

It would be an odd move for Google, assuming the deal goes through. In 2011, Google bought Motorola for $12.5 billion in a effort to ramp up its hardware ambitions. Motorola released a few handsets while operating as a Google subsidiary, but none of them were blockbusters.

In 2014, Google dumped Motorola and sold it to Lenovo for $2.9 billion.

Back to hardware

But Google has a renewed interest in hardware, and it's seen as a growth area for the company outside its core ad business.

Last year, Google formed a new hardware division under former Motorola CEO Rick Osterloh. Osterloh's group was responsible for products like last year's well-received Pixel phones, Google Home Speaker, and Daydream View VR headset. Google partnered with HTC to manufacture the Pixel phone.

Google is expected to release an update to the Pixel phone and a new touchscreen Chromebook in October.