TAIPEI — Taiwanese smartphone maker HTC has risen to global prominence by transforming itself from a contract maker into a viable brand, one of the toughest feats in the fiercely competitive hi-tech industry.
"Quietly Brilliant" is the motto adorning HTC's advertisements -- and quietly, brilliantly it has managed to grow and grow, until recently it stunned the industry by becoming as big as Nokia.
"Today HTC is synonymous with smartphones," said Wang Ying-Yu, a research manager at Industrial Technology Research Institute, a think-tank in the city of Hsinchu in northern Taiwan.
"It has been more successful than any other company in Taiwan at pulling off the difficult task of building a brand," he said.
HTC's market value is now around $33 billion, about the same level as Nokia and surpassing Blackberry maker Research In Motion's (RIM's) $28 billion, according to analysts.
HTC has also set several records in Taiwan, and was listed as the most profitable company last year, while co-founder and chairwoman Cher Wang is currently the island's richest person.
Like many Taiwanese firms, HTC started as a contract manufacturer for major foreign brands such as Microsoft and only began developing its own brand of handsets in 2006.
The theory sounds nice -- learn the ropes, then launch your own product -- but so far only a handful of elite Taiwan companies such as computer maker Acer have managed to get it right.
"Others who tried ended up hurting themselves and typically saw their shares fall by half," Wang said.
Not HTC. It is now the world's fifth largest smartphone maker by shipment after Nokia, Apple, RIM and Samsung, and it can challenge Apple's market share in Europe and Asia, analysts said.
Momentum is further boosted by first quarter results, which saw its unaudited net profit nearly triple from the same period last year to Tw$14.83 billion ($510 million) while revenue surged 174 percent to Tw$104.16 billion.
This year HTC boss Wang, the 52-year-old daughter of late industrialist Wang Yung-ching, was crowned Taiwan's richest person by Forbes magazine, which estimated the combined wealth of her and husband Chen Wen-chi at $6.8 billion.
"Cher Wang is more like a spiritual leader of the company. She has a good eye for talent and she supports and trusts her professional management team," Wang said.
Analysts said HTC's close partnership with telecom operators and Google has given it an edge in the business. HTC was the first to make devices powered by Android, which is now adopted by LG, Motorola, Samsung and Sony.
"HTC is in time for the rise of smartphones and it is riding the boom of Google's Android," said Luke Lin, an analyst at Taiwan's IT journal Digitimes.
Android is the most popular operating system for mobile devices, and technology research firm Gartner expects it to have 38.5 percent of the market by the end of 2011, ahead of the 19.4 percent for iOS for Apple's iPhone.
"It is going to be even better for HTC this year although it faces growing challenges for market share," said Lin. He estimated shipments to almost double from last year to about 50 to 55 million units.
"This year will see... these same (Android) vendors broaden and deepen their portfolios to reach more customers, particularly first-time smartphone users," said Ramon Llamas, a researcher at International Data Corp.
The company has also jumped onto the tablet bandwagon with its first tablet, Flyer, due to go on sale in the second quarter, although analysts said it was too early to say how it could contribute to the bottom line.
"We view this more as a product to test the market. We tend to believe tablets may not be a near-term value driver for HTC," said a recent Morgan Stanley report. It forecast fewer than two million shipped in 2011.
Underscoring the intense rivalry between smartphone makers is an ongoing dispute between HTC and Apple, which have accused each other of patent infringement and appealed to the US International Trade Commission to bar the other's products.
"An unfavourable ruling will certainly impact its (HTC's) operations," said Lin of Digitimes.
Intel, on the Outside, Takes Aim at Smartphones
By LAURIE J. FLYNN
Published: April 10, 2011With an “Intel Inside” sticker affixed to their PCs, computer buyers in the 1990s could hardly avoid knowing whose microchip was making their machines work. The campaign made Intel one of the most recognizable brands and cemented its position in the PC industry.
As long as PCs were dominant, Intel was dominant. But it’s now a new world in which tiny hand-held computers, more commonly known as smartphones, are outselling personal computers.
And usually, there is no Intel inside.
Instead, the processors in smartphones and tablets these days are more likely to be made by companies that few consumers would recognize, like Qualcomm, Nvidia and Marvell. And those companies are fighting to gain market dominance in much the same way Intel did with chips for personal computers: by making what’s inside the phone matter to consumers.
“It’s become an arms race, like the early days of the PC industry,” said Chris Jones, vice president and principal analyst at Canalys, a market research company. These chip companies are racing to improve the speed and performance of their processors so they can boast of having the fastest application processor on the market. With smartphones and tablets increasingly performing the tasks of full-size computers, they have an additional obsession: making energy-efficient chips that will prolong the battery life of a mobile device.
So far, the obsession with speed and energy efficiency has paid off for everybody but Intel. The PC chip giant has been conspicuously late to the mobile market, having canceled plans to ship a smartphone version of its Atom processor after a demonstration of it running in an LG phone over a year ago.
The difficulty for Intel, say analysts, has been to get its chips’ power consumption down to a level reasonable for a phone. Still, Paul Otellini, Intel’s chief executive, vowed recently that Intel-powered smartphones would be on the market before the year is out. With those phones, Intel hopes to rebuild credibility in a business some customers had thought it would never get right.
But meanwhile, the company has just recently lost its mobile champion, Anand Chandrasekher, the 24-year Intel stalwart who has long headed up the company’s mobile processor development, including the wildly successful Centrino product that made Wi-Fi a household name.
While industry analysts were divided on whether Mr. Chandrasekher had resigned or had been pushed out, they were in agreement on one thing: The company has a lot of catching up to do in the mobile market. “It’s clear that Intel’s mobile business is not going as well has they had hoped,” said Linley Gwennap, an industry analyst and head of the Linley Group in Mountain View, Calif. “But this is not an indication of a change of strategy, just of leadership.”
Intel executives quickly assured the industry that the company remained committed to smartphones, despite the sudden departure of Mr. Chandrasekher.
Competitors say they will be ready for Intel when it arrives. “I always assume they’ll show up,” said Michael Rayfield, general manager of Nvidia’s mobile group. “All I can do is innovate rapidly to stay ahead.”
Intel’s competitors are also hoping that a recent decision by Nokia, the largest phone maker, to use Windows Phone 7 rather than the Symbian operating system, will help them fend off Intel, given that the Microsoft program is currently optimized for ARM-based cellphones. “Nokia used to be a nonopportunity for us,” said Jen-Hsun Huang, chief executive of Nvidia. “Our market opportunity just got 33 percent bigger.”
Qualcomm has the same idea. Anything that expands the “Microsoft phone ecosystem,” said Steven M. Mollenkopf, executive vice president and group president at Qualcomm, based in San Diego, is a “positive thing for Qualcomm.”
In contrast to the PC market, in which Intel and Advanced Micro Devices slugged it out through the 1980s and 1990s, the list of companies supplying chips for smartphones is long. Qualcomm, Texas Instruments and Samsung lead the market with a combined market share of 87 percent — with the biggest share of that belonging to Qualcomm. Nvidia, Broadcom, Samsung, Marvell and others are vying for the remainder, according to the market researcher Strategy Analytics.
While most PCs have long run Microsoft’s Windows operating system on an Intel chip, the smartphone business is increasingly mix-and-match when it comes to chips and operating systems. Qualcomm’s Snapdragon chip, for example, powers Google’s Nexus One phone, which runs Google’s Android operating system. The LG Optimus 7 has a Qualcomm chip but runs Microsoft’s Windows Phone 7.
Likewise, Samsung’s Focus uses the Qualcomm chip and Windows, while Dell’s Streak, a tablet, uses a Qualcomm chip and runs Android. Motorola chose a Texas Instrument chip for its Droid smartphone and the Tegra 2 for its Atrix smartphone, yet both run Android.
The Apple iPhone 4 uses a chip, called the A4, which was designed by Apple and manufactured by Samsung. That phone’s operating system, and that of the iPad, is Apple’s own.
But given how fast the mobile market is growing, the market landscape could change at any time. “Over the next year or so, there’s going to be a lot of innovation in the industry,” said Mr. Mollenkopf. “It’s not clear who is going to be the winners of that.”
The stakes are enormous. In 2010, smartphone shipments increased 74 percent over the prior year, according to the market researcher IDC. In contrast, the PC market grew only 14 percent. That means a lot of chips. IDC forecasts cellphone makers will sell 330 million devices in 2011. Strong smartphone sales drove revenue in the communications chip sector to $80 billion in 2010.
Qualcomm’s advantage may lie in its ability to integrate an application processor with communications and graphics functions, and in its long history in the communications chip market. “In the long term, the industry favors those who have significant volume,” Mr. Mollenkopf said.
Nvidia, a maker of graphics chips, entered the ARM-based smartphone market in January and has already scored numerous commitments from handset makers. Motorola chose Nvidia’s Tegra 2 for its Atrix smartphone, which when docked with a laptop serves as the laptop’s processor. Motorola also chose the Tegra 2 for its Xoom tablet. Samsung is using the Nvidia chip for its Galaxy phone.
Nvidia executives say the company’s experience and reputation in the graphics chip market have made its move into mobile computing a smooth one.
“The shift to these devices turning into computers is a once-in-a-lifetime opportunity for us,” Mr. Rayfield said. “They’re moving to a space where Nvidia has grown up.”