28 January 2020

HTC faces the essential question

How much longer can HTC hang on? This question came up in a recent blog under the IT section of the 21st Century Business Herald regarding the Taiwanese smartphone maker’s shaky future after it slid into the red for the first time in the latest quarter.

First-class pricing, second-class product, third-class cost control is how a phone manufacturer describes HTC’s image in the industry, according to the daily.

Some HTC products do offer impressive features and quality but these are considered too expensive compared with major league brands Apple and Samsung.

Why can’t HTC offer them at a cheaper price? The answer is rooted in its high cost base. The blog pointed out a lack of patents as HTC’s fundamental weakness. Making smartphones involves lots of technologies. Yet, HTC’s outlay on patents far exceeded related income.

Unlike vertically integrated Samsung, HTC has no access to low-cost, high-quality chips, memory, screens or other modules.

While relying on external supply, HTC does not have enough pricing power in the procurement market the way Apple does given its relatively modest market share. 

After Nokia sold its handset business to Microsoft and BlackBerry was reported to be up for sale, rumors began to emerge about a potential tie-up for HTC with a couple of Chinese companies, notably Lenovo Group (00992.HK).

HTC chairwoman Cher Wang has repeatedly rebuffed speculation that the company is for sale. But amid intensifying competition, the clock is ticking for Wang, No. 46 on Forbes’ Power Women list (after Lady Gaga) to make a decision — going solo or taking a strategic partner.

No matter which path HTC picks, it has to move fast before its brand equity and cash go down the drain.

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