Date
19 October 2018
HTC is pinning a lot of hopes on its Vive VR headset and related efforts, but the rewards may not come in easily. Photo: Bloomberg
HTC is pinning a lot of hopes on its Vive VR headset and related efforts, but the rewards may not come in easily. Photo: Bloomberg

After job cuts, what HTC needs is a clear direction

It was a sad day for employees of HTC as the Taiwan smartphone maker announced on July 2 — the first working day of the month — that it will slash its workforce by nearly a quarter as it seeks to realign its resources.

The company said 1,500 jobs will be cut in its manufacturing operations in Taiwan, with the layoffs scheduled to be completed by the end of September. HTC said it will try its best to help the affected workers and that it will offer them any assistance needed to help them find new work.

Citing the need to “optimize the manufacturing organizations”, the Taiwan tech firm, which was once among the smartphone leaders on the world but has fallen on hard times in recent years, said the workforce reduction “will allow more effective and flexible resource management going forward.”

According to a Reuters report, HTC had about 6,450 workers globally as of June. That means the company is now reducing the headcount by more than 23 percent.

It’s worth noting that HTC had more than 12,000 staff in 2015. The number was brought down by almost half in the past three years as the company was mired in operating losses.

The latest round of job cuts is seen as a painful but necessary step for HTC as it strives to regain footing after its smartphone products failed to impress mass-market users in recent times.

According to HTC’s annual report, it had a production capacity of 9.6 million units in 2017, down from 18.4 million units in the previous year. However, the actual production quantity was only 5.02 million units last year, compared with 7.91 million units in 2016.

It is quite expensive for HTC to maintain the scale of its production lines in Taiwan, given the actual output volumes and weak smartphone sales.

Given the ongoing challenges and business troubles, HTC might find it worthwhile to take a step forward and offload its phone production lines to potential buyers such as contract maker Hon Hai.

HTC should also consider turning into a contract phone maker by accepting orders from third parties, just like what the company had done before 2006, especially after the firm sold its Pixel unit last year to Google.

The management should strike a balance between the core competence of the company and the cost of maintaining a “Made in Taiwan” reputation just to please a small group of loyal HTC fans.

HTC has been focusing a lot on virtual reality (VR) development recently, pouring resources into the segment and creating the VR headset, the HTC Vive.

However, the company is yet to disclose how much revenue it had generated from such business. VR could well be the future of mobile technology, but HTC has failed to secure the first-mover advantage in the market. Currently, HTC is facing tough competition from two industry giants, Sony and Facebook.

According to market research firm Trendforce, in terms of VR device shipments, Sony’s PlayStation VR is expected to record annual shipments of 2 million units this year, aided by the Japanese firm’s established strengths in the game console industry.

Facebook’s Oculus and Taiwan’s HTC, meanwhile, are seen shipping one million and 600,000 units respectively. TrendForce, in its forecast made early this year, believes total global shipments of VR devices will be around 5 million units this year, with HTC in the third place.

The shipments are not expected to register substantial growth until 2020.

HTC has been pushing its Vive headset for more than a year but it is yet to become a big hit in the mass-market, as the headset is quite expensive and somewhat difficult to use.

As of now, the VR headset is a niche market product or used mainly for business purposes.

For instance, WWF Hong Kong — a branch of the World Wide Fund for Nature — is using Samsung VR headset in roadshows to educate the public as to how pollution is affecting marine life. In other examples, some art museums are using VR headsets to provide enhanced tour experiences.

HTC is waiting for a chance to bring its smartphone and VR technology together to come up with the next-generation gadget. However, given the market response so far, VR may not be what people want in terms of mobile experience. Not too many consumers would be willing to wear a big and heavy headset to watch a film with special effects.

What people want may be very simple: to enjoy their content from reliable sources via a single and easy-to-use device. Will that be a smartphone, eyeglass or something else?

Given the various challenges, HTC may need to think about the future of its product development and work out a possible solution to integrate 5G and virtual data usage.

Company chairperson Cher Wang is yet to make it clear whether she sees smartphones or VR as the future of HTC. It may not be realistic for Wang to have both in hand as the risk of making a new smartphone with VR technology could be too high for her firm to bear.

– Contact us at [email protected]

RC

EJ Insight writer

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