Market Insight

Google evolves its hardware strategy with new Pixel 2 and 2XL

October 04, 2017

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Google announced today the Pixel 2 and 2XL; specifications include:

  • 5” FHD OLED
  • 6” QHD P-OLED in 18:9 aspect ratio, 538ppi resolution with circular polarizer
  • Qualcomm Snapdragon 835 chipset
  • IP67 water and dust resistance
  • 12MP f/1.8 with OIS and EIS capable of Portrait photography with one lens
  • Active Edge (squeeze interactions)
  • Stereo front-facing speakers

Also announced at the event:

  • Google Home Mini (Smart Speaker)
  • Google Home Max (Smart Speaker)
  • Google Pixel Book (Chromebook)
  • Google Pixel Book Pen (Chromebook Accessory)
  • Updated Google Daydream VR Googles
  • Google Pixel Buds (Smart Wearable)
  • Google Clip (Smart Camera)

One month after their announcement to “acqui-hire” some 2000 professionals from hardware partner HTC, Google announced their intent today to remain relevant in the hyper-competitive smartphone hardware space with the successor to last year’s Pixel phones, the Pixel 2 and 2XL, pitting their new devices up against the flagship smartphones recently announced by Samsung and Apple.

The new Pixel 2 and 2XL follow up the tepid success of the original Pixel which was critically acclaimed but suffered from lack of availability which hampered its sales for much of the year.  Having shipped just over 1.5 million units in the last 3 fiscal quarters according to IHS Markit Smartphone Intelligence Service, the Pixel represented Google’s official claim to a smartphone brand after years of experimenting with the Nexus line of smartphones and even a brief ownership of the famed Motorola brand. Where the Nexus line of devices was developed in partnership with handset makers, Pixel is all Google. Google’s near decade-old hardware ambitions grew in fits and spurts, often at the whim of the fortunes of its core search business.

“Made by Google” is a concerted hardware strategy by Google to push its own hardware product portfolio to connect with its services.  Adding to their mission to be an AI-first company, this strategic imperative is ever more evident as the key to building a defensible ecosystem of products and services to better compete not only with the likes of Apple but other growing Android competitors such as Samsung and Huawei, as well as Amazon.

Return of LG as hardware partner

With Pixel 2, Google is splitting the production between HTC and LG. The original Pixel suffered supply constraints and therefore had more limited reach. With LG as production partner and its supply chain, Google hopes to alleviate potential production bottlenecks when using just one production partner. Also with LG, Google inherits their unique 18:9 aspect ratio mobile display and P-OLED technology.

Pricing and hardware differentiation

The new devices are flagship phones and fall in line with the pricing of other recent flagship launches this year. The most expensive model of the Pixel 2 XL costs $949, approximately the same price as the 64GB Samsung Galaxy Note 8 and the 256GB Apple iPhone 8. Clearly, Google is looking to position its hardware brand as a premium option amongst the competition.

What does “Made by Google” mean?

Google’s strategic imperative with their hardware is clearly to demonstrate a first-party manufacturer capability in much the manner that Microsoft is attempting to do with their Surface products.  Clearly, entering a competitive space alongside your ecosystem partners makes for an uneasy alliance.  Android OEMs such as Samsung and Huawei will view “Made by Google” as a direct competition to their high end mobile products.  However, just with the strategy that Microsoft has embarked on, Google hopes that their “Made by Google” effort will return more benefits to the larger ecosystem that they help support and to lift the fortunes of all Android OEMs.

Google Inc.
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