Three years is a long time in the technology space but that’s how fast it took Taiwan smartphone maker HTC Corp. (2498.TW) to go from great to good to average.
In 2010, it rang in the first Android smartphone and commanded the high end of the market. By 2013, it had reported its first net loss after two successive years of falling revenue.
Meanwhile, technology has evolved faster than it could establish a foothold in the low to medium end of the smartphone market. Its high-end pedestal is being chipped away by rivals such as Samsung Electronics, Apple Inc. and Sony Corp.
Clearly, HTC needs a serious overhaul.
The operating picture says it all. Revenue was NT$203.4 billion (US$6.7 billion) last year, down from NT$289 billion in 2012 and NT$466 billion in 2011.
The company swung to a net loss of NT$1.3 billion last year from a net profit of NT$17.6 billion in 2012 and NT$62 billion in 2011.
The drastic decline has called HTC’s long-treasured in-house manufacturing model into question.
Asked whether it would outsource part of its production to regain the profit margin it enjoyed in previous years, HTC answered a flat no, saying in-house production is one of its strong points and a way to uphold product quality.
With annual shipment below 10 million units, HTC could be hard pressed to maintain two smartphone factories in Taiwan and China.
Samsung and LG make their own phones but that is more the exception than the rule. Apple’s iPhones are mostly assembled in China by Foxconn Technology Group. Xiaomi, a fast-growing Chinese phone brand aiming to sell 40 million smartphones this year, also relies on Foxconn and other partners to make its devices.
If nothing else, the latest financial results remind HTC to rethink its approach to manufacturing and seriously consider outsourcing at least part of its production.
It’s a shame that HTC can produce some of the most beautiful products but not capable enough to turn them into solid earnings.
HTC One, for instance, is recognized by some foreign media analysts as the best Android smartphone last year, beating those of Samsung, Sony and LG.
But HTC could not produce enough of them to meet an unusually robust demand. Weak supply chain management did it no favors either.
The end result was the painful spectacle of die-hard HTC fans switching to other brands.
That should have been a lesson for senior executives to start focusing on product development, brand building and distribution while leaving the manufacturing to somebody else. But it appears they’re no closer to doing that than they have ever been.
Nevertheless, all is not lost.
HTC can start a comeback by strengthening its supply chain management, improving delivery times to market and building up its presence in the Chinese mainland.
No matter its present difficulties, HTC is still perceived as a premium brand by Chinese phone users compared with its domestic peers.
And it continues to command respect from the industry. Last year, it teamed up with China Mobile to launch its first 4G handset when China Mobile debut its 4G services.
With a committed partner like of China Mobile, HTC can become competitive again. Who knows what the next three years will bring.
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