Google is, apparently, working on its own phone. Google isn’t exactly a stranger to the hardware world — they do all kinds of hardware work internally (ranging from building their own infrastructure, to cargo containers that contain a decentralized server hub that can be shipped anywhere and plugged in, to immense, highly optimized server farms) and even sell some hardware products (enterprise search engines that can be installed on a corporate LAN and remotely administered). But Google is a stranger to consumer hardware.
Alan Kay once famously remarked that if you’re really interested in software, you build your own hardware, but the more I think about this, the less it makes sense to me for Google to release its own phone hardware (except possibly as a reference platform).
Economics 101 dictates that you want your complements (products that help consumers use your product) to be free or cheap and ubiquitous (makes sense) and competing products to be expensive and rare. For Google, web browsers are their ultimate complementary product. If FireFox and Safari didn’t exist, Google would have had to invent them.
So what Google really wants is for every cellphone out there to be a web browser with full “Web 2.0” support — i.e. basically an iPhone. But to do this it needs to make them good, cheap, and very common — something Apple can’t or won’t do.
It seems like the best way to do this would be do produce a great cellphone OS and license it for next-to-nothing. This would simultaneously help push Microsoft out of this space and turn lots of cell-phones into Google-friendly web-browsers. Rather than having to figure out how to manufacture and sell phones at a profit, Google would simply help existing phone companies to do this, and make more profits the way it already does: via web advertising.
Google would probably be just as happy if every cellphone became a standards-compliant web browser without their help. The question is whether Google needs to do anything (now that Apple has essentially raised the bar for cellphones across the board) except wait.