The deal will help Google design more of its own consumer hardware and could set it up to wade deeper into special-purpose chips - like Apple.
Google’s most recent Pixel model came with a new image processor to improve the device’s camera. More of this “custom silicon” will come in the future, said Google hardware chief Rick Osterloh.
Osterloh brought in HTC engineers and designers to help Google control more of the design and production of its products, including working more closely with suppliers.
Google previously focused on software and let manufacturers, including Samsung Electronics and HTC, handle the hardware.
But modern phones offer features such as augmented reality and artificial intelligence-based services that require close integration of software and hardware.
“You have to be vertical in some cases to really push the envelope for consumers,” Osterloh said. “Our intention is to invest in this for the long term. You'll see a steady increase in investment from us.”
HTC said in a separate statement that it plans to proceed with its next flagship smartphone and will focus its efforts in the segment.
“Today marks the beginning of an exciting new chapter at HTC as we continue to drive innovation in our branded smartphone and VIVE virtual reality businesses,” said HTC chairperson Cher Wang.
For Google, a bigger step would be to create its own “system-on-a-chip” - the main processors inside phones that Apple now inserts into its devices.
Qualcomm provides the bulk of these chips to Android phone makers, and Osterloh said Google will keep working with the supplier for the foreseeable future.
Still, by designing more silicon itself, Google could cut business for other suppliers. Apple released its first system-on-a-chip in 2010.