Shulou(Shulou.com)11/24 Report--

According to reports in the morning of October 19, Beijing time, Google may be experiencing its worst nightmare right now, with Apple's iPhone grabbing market share from Samsung phones running Google's Android. At the same time, US antitrust regulators are reviewing Google's search deal with Apple, which could deprive Google's search engine of its position in iPhone Safari browsers.

These disadvantages are threatening the development of Google's mobile advertising business, causing the technology giant to start a big gamble. According to an internal document from Google, the company is increasing its investment in hardware development, including the Pixel range of phones. In addition, the company is transferring non-hardware product development and software engineering personnel to the hardware equipment department.

Google has not reduced its support for Android devices made by top partners, including Samsung, but it is more of a bet that the South Korean electronics maker's business is likely to decline further. Sissie Hsiao, a senior Google search executive, recently told some colleagues that Sandal Sundar Pichai, Google's chief executive, believed Google should build its own devices because it was "best to protect the company from the broader mobile market", according to people familiar with the matter. Xiao also told colleagues that Google is worried that Samsung's customers will be taken away by Apple.

Google's decision to transfer engineering and developers to Google-branded hardware reflects the economic pressure on the company from a sharp slowdown in the digital advertising market. Pichai said publicly and privately last month that he wanted the company to be 20% more efficient, and hinted that hiring and budget cuts were just around the corner. Since then, Google has cut budgets in departments considered less important to its existing business, such as an in-house startup incubator, with mixed results.

Google has decided to reduce its investment in developing Google assistant voice-assisted search in cars and non-Google-made devices, including televisions, headphones, smart home speakers, smart glasses and smartwatches using Google's Wear OS software, according to the document. This practice reflects the attitude of the company.

Xiao Xiao, vice president in charge of Assistant, which is similar to Apple's Siri voice assistant, told some colleagues in the company that the Android Auto operating system used by automakers, including Volvo and BMW, would soon generate about $1 billion a year for Google, which could power vehicles' infotainment systems. However, Xiao said the amount was too small to have a material impact on the company's business (Google had revenue of $257.6 billion last year), so she considered diverting some people from the job. Xiao is responsible for managing more than 2000 employees.

Google provides Android Auto software that can be connected to cars, and Android users can plug their phones into the car and project their device content onto the car display, similar to Apple's CarPlay software, and there is no sign that Google will slow down its development of the feature.

Google executives also discussed another option: transfer some product managers who develop Google TV software for televisions to a team that develops software for wearable devices Wear OS, and a team that develops tablets, which remains secret, according to a person familiar with the discussions.

The changes could be bad news for a range of hardware and carmakers that do business with Google. Google has taken Samsung and Chinese brands OnePlus and Xiaomi as high-quality Android phone partners and should develop the best Google services for them. However, for a large number of other Android phone makers, they may not get the same attention from groups such as the Google Assistant team.

The cost cuts triggered by the slowdown in advertising and some of the decisions made by Google executives are made for strategic reasons, and they need to pay more attention to their own hardware rather than continuing to support hardware produced by other companies.

When it comes to consumer devices, Google has long been pulled in two directions. The company's roots in Internet software put it in the first place in developing Android, which overtook Microsoft's mobile operating system more than a decade ago to become the most widely used mobile operating system in the world. Google is continuing to develop the software and is working with dozens of consumer brands that make Android-based devices, including Samsung. However, Google has gradually begun to focus on developing its own hardware. The company began making Google-branded Pixel smartphones in 2015 and handed them over a year later to Rick Osterloh, who ran Google's handset maker Motorola Mobility from 2012 to 2014.

So far, however, Google has not produced a popular mobile phone. Figures released by research firm Canalys show that 4.5 million Pixel phones were sold in 2021, compared with 230 million iPhone shipments from Apple and 275m from Samsung. But Google is not flinching. It has stepped up production of the latest Pixel 7 devices, which went on sale last week, starting at $599 for the basic version and $899 for the Pro version, both lower than the latest basic and Pro versions of iPhone. Google has also been trying to diversify Pixel's contract manufacturers so that it can produce the device outside China. In recent years, Google has also acquired Fitbit, a maker of fitness trackers, for $2 billion. Last year, it launched its first chipset for mobile devices, similar to Apple's long-term effort for the iPhone, so Google's machine learning algorithm can run faster on its devices.

Another reason Google is investing more in Pixel is that Samsung is losing market share to Apple. For example, Counterpoint Research estimates that iPhone accounted for more than 50 per cent of the US smartphone market for the first time in June. Samsung is an important partner of Google, which loads a large number of revenue-generating Google apps on its devices under the licensing agreement of Google's Android mobile operating system.

Just as Samsung's decline is bad for Google, the growing strength of iPhone is a problem that cannot be ignored. Although Google search is the default search engine for Apple's Safari web browser, the profit margin generated by the deal from ad sales is much lower than Google's profit from Android devices because Google has to pay Apple a huge share of revenue. In addition, US antitrust regulators are trying to break Google's default search agreement with Apple as part of their efforts to control Google's power in the search market. If regulators succeed, Google could lose a large portion of its search business and be replaced by competitors such as Microsoft's Bing. Bing has begun to support some searches derived from Siri voice queries on iPhone.

Kirt McMaster, who is developing a wireless network based on blockchain, says Google's consumer hardware business has been affected by a fragmented strategy in the past because it uses different brands on mobile phones (Pixel), laptops (Chromebook) and smart home devices (Nest). McMaster previously ran Cyanogen, a mobile phone maker that uses a modified Android system. Google faces the prospect of not advancing or falling behind, he said, because Apple continues to expand its market share even in such mature markets as the US and Japan.

"can Google do this in time?" McMaster said. "there's a good chance they won't. Apple is now in control, and if it doesn't develop a cohesive hardware strategy now, Google will cede power to Apple."

Google's trade-off may mean that the company will invest less in some hardware equipment. Xiao, for example, has previously said she would remove Assistant from less important devices, such as Fitbit devices running non-Google OS and laptops running Chrome OS.

A Google spokesman declined to comment.

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