Wed, Apr 24, 2013 - Page 13 News List

HTC shares plunge after microphone court ruling

By Kevin Chen  /  Staff reporter

HTC Corp’s (宏達電) shares plunged yesterday after a Dutch court ordered a key microphone supplier to stop sales to the Taiwanese company, renewing concerns over the smartphone maker’s supply of components.

HTC said it was working with STMicroelectronics NV, Europe’s largest semiconductor maker, on contingency plans to solve the microphone issue, but analysts warned the worst-case scenario could be HTC would not be able to ship any of its latest flagship handsets in June.

“HTC’s share price could be weak today and tomorrow,” Birdy Lu (呂家霖), an analyst with Daiwa Capital Markets, said in a note yesterday. “It is hard to predict the outcome of the court decision. Based on experience, the theoretical impact always sounds significant, but the real impact tends to be smaller.”

HTC shares closed 3.25 percent lower at NT$268 in Taipei trading. The stock has declined 10.82 percent so far this year, Taiwan Stock Exchange data showed.

On Monday, Nokia Oyj was awarded a preliminary injunction at the Amsterdam District Court to block STMicroelectronics from selling microphone components to HTC, Bloomberg reported.

The report, citing the court, said STMicroelectronics’ microphone was made especially for Nokia and the company could not supply the product to other firms under a year-long exclusivity deal, effective until March next year.

The microphone issue is the latest problem to hit HTC’s flagship “One” smartphone after the company was troubled by a shortage of key components, such as anti-vibration voice coil motors, metal casings and ultrapixel sensors in the first quarter.

HTC has viewed the “One” as a key product to help it regain lost market share from Apple Inc and Samsung Electronics Co. The company launched the flagship product in Taiwan, Germany and the UK last month, in the US on Friday last week, and it is scheduled to launch in China today.

“HTC is disappointed by the decision,” the Taoyuan-based company said in an e-mailed statement. “We are consulting with STM [STMicroelectronics] and will decide whether it is necessary to explore alternative solutions in due course.”

STMicroelectronics is the sole supplier of the HTC One’s high-definition range (HDR) microelectromechanical sensor (MEMS) microphone due to its unique dual- membrane design.

While the two companies are trying to come up with “alternative solutions,” the worst-case scenario for HTC is to find a second source and use normal MEMS microphones as a replacement for the HDR MEMS microphone.

This might mean the HTC One would lose one of its key features — the HDR voice recoding capability, Lu said.

“It is not difficult to find a second source for the MEMS microphone, but this second source might not be able to offer the HDR feature,” Lu said.

HTC did not comment on its current inventory of HDR MEMS microphones. The company only said it did not expect the issue to have any immediate impact on its handset sales.

Daiwa said HTC's second-quarter sales might decline to a range of between NT$58 billion (US$1.94 billion) and NT$60 billion from its previous estimate of NT$70 billion under its worst-case scenario. In the first quarter, HTC reported sales of NT$42.79 billion, down 36.88 percent year-on-year.

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