Taiwanese smartphone maker HTC Corp (宏達電) last week unveiled its first wearable “smart” sports wristband, the Grip, and virtual reality headset the Vive during the annual Mobile World Congress in Spain, after its first move into a non-smartphone area with the debut of its “action camera,” the Re, six months ago.
That reflects HTC’s eagerness to expand its reach to non-smartphone areas, which some analysts said might be the right strategic move to help it survive the rapidly saturating and highly competitive smartphone market.
According to a forecast by market researcher GfK Group, worldwide smartphone shipments are expected to grow at an annual rate of 14 percent to 1.39 billion units this year, which is a slower growth rate than last year’s 23 percent, due to growing smartphone penetration rates in developed markets.
With growing smartphone penetration rates and improving smartphone performance, it has become harder for handset vendors to differentiate their products by using faster processors, better camera lenses, bigger screens or higher resolutions, as these are now regarded as standard, CIMB Securities Ltd said in a note released on Wednesday.
To seek new growth drivers, smartphone makers, including Apple Inc, Samsung Electronics Co, Xiaomi Corp (小米) and HTC, have all been investing in different smart devices in recent years.
HTC CEO Peter Chou (周永明) said that the launch of the HTC Re was just the beginning of the company’s development in that area.
HTC’s goal this year is to expand the brand’s reach by introducing various smartphones and non-smartphone products to consumers, HTC North Asia president Jack Tong (董俊良) said.
At the Mobile World Congress last week, Chou told reporters that the company has been looking for new business opportunities outside of the smartphone sector over the past two years, and it has found a “new direction.”
HTC chief financial officer Chang Chia-lin (張嘉臨) also said the company expects its non-smartphone segments to start making significant revenue contributions in the second half of this year.
At the beginning of this year, HTC announced a strategic partnership with US sports clothing and accessories supplier Under Armour Inc, with which it codeveloped its first wearable fitness tracking device, the Grip.
At the Mobile World Congress, HTC also announced a partnership with US-based gaming software company Valve Corp to codevelop virtual reality Vive products.
It is a sensible strategy for HTC to find a good partner for niche products, as companies with a smaller customer base like HTC would be able to leverage growth through its partners, Deutsche Bank AG said.
The gadgets codeveloped with Under Armour and Valve should help HTC build a larger user base, Deutsche Bank said.
Daiwa Capital Markets said those two new products, along with the HTC Re camera could help consumers build engagement with HTC’s brand and drive sales growth.
JPMorgan Securities Ltd said that, despite Internet of Things-related products being considered as an area with great growth potential, it might be another tough battleground for HTC, because most major handset brands, such as Apple, Huawei Technologies Co Ltd (華為) and Samsung, have already targeted this market to grow and have significantly more resources.
“It is too early to determine who will be the winner in the smart devices market, but the value of smart devices might reside in ecosystem players rather than device vendors,” JPMorgan analyst Alvin Kwock (郭彥麟) said in a note released on Monday last week.
Commenting on the HTC Vive, Kwock said high-end virtual reality gaming is an interesting new market, but it is still unclear if virtual reality gadgets would bring meaningful profits to the company in the near future, as HTC plans to launch the Vive Developer Edition before this summer and the Vice Consumer Edition would only be available by the end of this year.
Yuanta Securities Investment and Consulting Co (元大投顧) said HTC tapping into a non-smartphone business was the right strategy, but it will take time for the new businesses to grow.
“Given that the Vive consumer edition will not hit the market until the end of this year, I foresee HTC’s non-smartphone segments not making a significant contribution to the company this year,” a Yuanta analyst, who declined to be named, told the Taipei Times.
Sharing a similar view, UBS Securities Pte Ltd also cast doubt regarding HTC’s non-smartphone products and whether they would generate profits this year.
“We believe these products are unlikely to generate meaningful sales or earnings in the near future,” UBS analyst Arthur Hsieh (謝宗文) said in a report on Tuesday.
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