I suspect it is a little from column A and a little from column B; he did also talk about it being good for the user experience etc.

They get patents and a manufacturing arm (which then gives them control of the entire product cycle for Android).

The latter is a logical move; a lot of Apple's success comes from controlling all aspects of the iPhone. I know Android is open software, but internally for Google it makes sense to drive product development from the hardware side too.