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By Yoon Ja-young
Google’s acquisition of Motorola Mobility may protect local manufacturers from patent wars in the short term, but it is more than perplexing news for them in the end. Analysts point out that handset manufacturers may be overlooking the software.
Google CEO Larry Page surprised the world by announcing that it would acquire Motorola Mobility, the one-time handset kingpin, for $12.5 billion. Officially, the acquisition aims at bolstering its arsenal in the patent war.
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Google has successfully competed with Apple’s globally popular iPhones by providing handset manufacturers with its operating system Android for free. However, the Android party faced an obstacle in the form of a patent war. Microsoft, for instance, has been demanding royalties from Android smartphone manufacturers, saying that the Google operating system infringed on its patent. Taiwanese manufacturer HTC agreed to pay a $5 royalty per handset, and Samsung Electronics is also negotiating.
“Android was free, but not anymore due to the technological barrier ― the patent. Some even forecast that manufacturers may switch to Windows phones from Android,” said Kim Chul-jung, an analyst at Korea Investment & Securities.
He pointed out that Google was cornered in this patent war as it lost to the Apple consortium in a patent auction by Nortel Networks.
Motorola, which developed the first cell phones in 1973, has around 17,000 patents in telecommunications technology and another 7,500 pending. The acquisition means Google has more ammunition to brandish against competitors like Apple and Microsoft.
Rivals shaking?
If Google wins the patent war, Android handset manufacturers will also be protected. Hence, official comments by Samsung and LG were positive.
“We welcome today's news, which demonstrates Google's deep commitment to defending the Android, its partners and the ecosystem," Shin Jong-kyun, Samsung Electronics’ mobile chief, was quoted as saying by Google.
Park Jong-seok, in charge of mobile business at LG Electronics, echoed Shin’s sentiments. “We welcome Google‘s commitment to defending Android and its partners.”
“Google’s acquisition of Motorola was anticipated. It won’t be much of a problem,” Samsung Electronics CEO Choi Ji-sung told reporters Tuesday morning. “Handset business needs more than OS,” he said.
However, the news is perplexing for local manufacturers as Google is likely to give more favor to Motorola under its arm in the end.
Analysts say the acquisition would not immediately affect Samsung or LG. Motorola has dwindled during the past few years in smartphone competition, and accounts for less than 3 percent of the global handset market now. Google needs to maintain ties with other manufacturers to broaden the Android market.
“This acquisition will not change our commitment to run Android as an open platform. Motorola will remain a licensee of Android and Android will remain open. We will run Motorola as a separate business. Many hardware partners have contributed to Android’s success and we look forward to continuing to work with all of them to deliver outstanding user experiences,” Page posted in his blog.
In the long term, however, Google-Motorola is likely to threaten other manufacturers on synergy between hardware and software. It would be easier for Motorola to get OS upgrades, and Google’s Nexus series is likely to go with Motorola. Android remains open to handset manufacturers, but nobody can guarantee it will stay that way. Google has already shown signs of concentrating on a few major manufacturers in the operating system.
Analysts point out that local manufacturers have relied too much on the Android OS and neglected the importance of having their own competitive software. Among around 20 million smartphones Samsung Electronics sold in the second quarter, about 85 percent were Android-equipped phones. LG Electronics, which sold 6.15 million phones, were all Android. Samsung has its own operating system ― Bada ― but it is negligible in the market, taking less than 2 percent. LG and Pantech don’t have their own operating systems.
“Local manufacturers are likely to diversify their portfolio, to Windows phones or whatever. But their investment in software will increase,” Kim said. He said LG Electronics is in greater trouble than Samsung, as it has no diversified portfolio. “When Motorola is resurrected, LG will be threatened.”
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