Feb 10, 2014
For HTC, the Dilemma of the Low-Cost Phone
Since then, the Taiwanese smartphone maker has seen a steady sales slide. The company forecast on Monday its second net loss on record, with revenue expected to hit its lowest in more than four years.
Which all means that HTC can no longer afford to cling to its former lofty strategy. On Monday, Chief Financial Officer Chang Chialin said that the company was pushing into lower price bands than ever before, with plans to roll out smartphones that cost $150 to $200. Last year, HTC’s cheapest smartphone sold in China for $230.
It’s a sharp contrast with two years ago, when Mr. Chou said that the company wouldn’t release any models that sell for 1,000 Chinese yuan ($165) or less, saying, “we won’t have good products at that price level.”
It’s a different person talking now, too. The changes come as Mr. Chang, a cost-conscious CFO who joined from Goldman Sachs, is gaining a larger say in the company’s direction. Mr. Chang had global sales added on to his responsibilities in December, and has since been speaking more publically on behalf of the company.
Monday marked his first solo sit-down meeting with reporters in Taipei, following the company’s release of grim first-quarter guidance. In person interviews about the company’s direction were primarily done by Mr. Chou or Chairwoman Cher Wang previously. The 46-year-old Mr. Chang was relaxed and congenial as he discussed the company’s strategy.
“Volume is more important to us this year than last year,” he said.
The $150 to $200 phones will be sold not only in China, but also in developed markets like the U.S. and Europe.
“It may come up in the retail environment, it may come up in the prepaid environment,” he said.
However, he added that the company still believed its strength came from its high-end flagship line.
The shift at HTC comes in response to a changing competitive landscape. Cheaper Chinese smartphone makers have been growing in strength, putting pressure on the rest of the market. Since last year, Huawei’s global smartphone market share has climbed to 4.9% from 4.0%, and Lenovo’s has risen to 4.5% from 3.3%, according to research firm IDC. HTC fell out of the ranks of the top 10 smartphone makers last year, and market researcher firms like Gartner and IDC no longer publish the company’s market share.
Even market leader Samsung has felt the squeeze, saying last month its fourth quarter mobile division earnings remained flat from a year earlier.
At HTC, the shift toward lower segments also comes after previous strategies have come up empty. The company last year tried to streamline its product lines with a focus on its flagship, saying it had previously spread itself too thin. Last year, 30% of its sales volume came from the flagship line, Mr. Chang said. HTC will launch more lower-cost models this year than last year, he said.