Who Will Make Googles Next Nexus Phone?

By Markets Fool.com

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Google's current-gen Nexus 6. Source: Flickr userTechStage.

As far as mobile operating systems go, Google's Android is the world's most dominant OS, claiming roughly 80% market share. Unlike Apple, which chose to pursue a closed ecosystem, Google followed the Microsoft model by focusing on the software, and partnering with multiple hardware (read: smartphone) manufacturers.

Actually, the company took its strategy a step beyond Microsoft's by making its service open source -- dubbed Android Open Source Project -- although Google firmly controls the application programming interfaces and app integration that U.S. Android phones need for success.

However, Google has not been as successful selling hardware. The company sold its Motorola Mobility business to Lenovo last year for $2.91 billion, amid a string of quarterly losses in the division, less than three years after paying $12.5 billion for it. (Google kept many of the valuable patents, though.) Google's only branded phone -- the Nexus line -- has used a revolving door of manufacturers including the aforementioned Motorola, HTC, Samsung, and LG.

Which company will make the next Nexus?
Naturally, the question is, which company will make the next iteration of Google's Nexus line? The company and potential manufacturers have been rather tight-lipped about the process, but the rumor mill has continued to swirl.

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First came a series of reports from China, aggregated by tech-site BGR, which reported that Huawei may have won the manufacturing contract. Perhaps more importantly, though, the site reported that Huawei's Kirin processor replaced Qualcomm's in the new Nexus iteration. If true, this would be the first time Huawei partnered with Google for the Nexus.

But that was so last week. More recently, rumors are coming out of South Korea outlining a visit of Google's engineers to LG's headquarters. This makes sense for Google.

After successful partnerships with LG with the popular, lower-cost Nexus 4 and Nexus 5 models ($349 for a 16 GB version, off-contract), the company abandoned this strategy with the Nexus 6 by going for a premium price tag ($649, off-contract), a larger display (nearly six inches versus nearly five inches on the Nexus 4 and 5 models), and more storage in its base model (32GB vs. 16GB). As far as reviews go, the Nexus 6 didn't receive as enthusiastic of a response from reviewers, mostly as a result of the price and size changes.

Ironically, the manufacturer of the last Nexus phone -- Motorola Mobility, now owned by Lenovo -- was left out of the newest discussion. It's entirely possible Motorola joins HTC, the maker of the first Nexus phone, as a one-time Nexus manufacturer. LG and Samsung both manufactured two iterations.

For Google investors, the manufacturer isn't that important
While device rumors are interesting, they aren't that important for Google investors. Google doesn't release unit sales figures for its Nexus line, and the company is much more reliant on its core business -- search -- for revenue and profit. In the end, the Nexus line hasn't been the game changer fans envisioned, and Android still counts on Samsung's Galaxy line for its luxury model.

Also, while it's true that manufacturers can add to the value-creation process, the actual assembly has become rather standardized, with the biggest contribution to value coming from cost leadership. In the end, the phone will be a success or failure on the basis of its ecosystem, design, and functionality -- not based on who assembles the product.

The article Who Will Make Googles Next Nexus Phone? originally appeared on Fool.com.

Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.