Wed, Mar 20, 2013 - Page 14 News List

ANALYSIS: HTC facing a plethora of challenges

COMEBACK KID?Although only able to spend a fraction of what its rivals can on marketing, HTC has vowed to stage a comeback by adopting fresh business strategies

By Helen Ku  /  Staff reporter

The challenges facing HTC Corp (宏達電) are greater than just reinvigorating its brand image.

Poised to start selling its new flagship model at the end of this month as it tries to regain a foothold in the competitive smartphone business, the Taiwanese company said on Monday that pre-orders for the new HTC One had already surpassed sales of all its previous models on the local market, including the popular HTC Butterfly.

However, analysts said a shortage of components used in the latest model has made investors concerned about HTC’s sales outlook this quarter and its ability to cut deals with key component suppliers.

There are also worries that delayed shipments of the new product might expose it to more competition from Samsung Electronics Co’s newest flagship model, the Galaxy S4, which was launched on Thursday last week in New York, they added.

“Internally and externally, HTC is faced with more threats, but they are challenges it expects to see and confront,” Hua Nan Securities Co (華南永昌投顧) chairman David Chu (儲祥生) told the Taipei Times by telephone yesterday. “The smartphone market is getting more competitive. Only those with lots of financial resources can play the game.”

HTC has vowed to stage a comeback by adopting fresh business strategies and increasing its marketing resources this year, after posting record low net profits of NT$3.9 billion (US$131.07 million) and NT$1 billion in the third and fourth quarters of last year respectively.

Chu said the company’s marketing costs of about US$46 million last year were substantially smaller than the US$14 billion spent by Samsung and the US$1 billion spent by Apple Inc. Chu referred to the spending as a “resource game between corporate groups.”

Last week, the Taoyuan-based company confirmed that shipments of the new HTC One would be delayed in certain markets, following market speculation that the firm is facing shortages of voice coil motors and compact camera modules due to low yield rates.

“HTC needs to secure support from supply chain partners,” Chu said.

According to International Data Corp’s statistics, Samsung’s shipments expanded 129.1 percent to 215.8 million units last year with a market share of 30.3 percent, while Apple’s shipments grew 46.9 percent to 135.9 million units with a market share of 19.1 percent.

In comparison, HTC’s shipments contracted 25.2 percent to 32.6 million units last year and the company held a market share of 4.6 percent.

To regain the market share lost to Samsung and Apple, Chu said that HTC needs to offer products with more functions and competitive price tags.

However, another analyst believes the number of flagship models is another issue for HTC.

“Samsung rolls out a new flagship product once a year, but HTC last year rolled out more than three products [the HTC One series, HTC 8X and 8S Windows phones and the HTC Butterfly series], which confused customers about which is the best one and therefore lowered their brand loyalty,” Taipei-based Fubon Securities Co (富邦證券) analyst Arthur Liao (廖顯毅) said.

Liao said HTC’s current problem is not Samsung, but itself.

“If HTC could improve its product yield rate and avoid delaying shipments this time, the new HTC One might change its fate,” he said.

Challenges are also arising in emerging markets, where HTC is facing an increasing number of rivals in the low-end segment.

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