The smartphone industry is in turmoil. Commoditization, market saturation, and plain old competition are weakening the position of established players, while hungry newcomers are seeing opportunities everywhere. Only the strongest will be able to grow in 2016, but the fate of smaller players is unclear.
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Case in point, HTC, a shadow of its former self, battling for relevancy throughout 2015. What does the new year hold for HTC? Join us as we examine the facts.
2015: a year to forget
HTC began 2015 on an optimist note, thanks to slowly improving financials and high expectations for the One M9. Smartphones aside, the Re camera seemed to signal a widening of HTC's focus, and there were rumors of an HTC tablet to follow up the Nexus 9, as well as an Android Wear smartwatch. The worst seemed to be over, or, as one company executive put it at the time, HTC had "been through hell and survived."
HTC's 2015 roadmap will be our best ever–with some huge surprises that will blow you away. ;)
— Jeff Gordon (@urbanstrata) December 31, 2014
Then MWC 2015 happened and our hopes for an HTC revival were quashed by the mundane reality of the One M9. HTC's 2015 flagship looked an awful lot like HTC's 2014 flagship, which itself wasn't that different from its predecessor.
Customers can forgive a repetitive design (just ask Apple), but in the M9's case, the public was expecting something very different. An image that trusted leaker Evan Blass put up showed a device with glass-covered front-facing speakers, as well as a larger model featuring a front-mounted fingerprint scanner. Days later, a set of high-quality renders based on the leaked image got everyone even more excited.
Then the M9 launched in late February, with only minimal changes compared to the M8. Worse, HTC had failed to fix the one glaring problem of the M8 – its hit and miss camera. The M9 came with a different camera setup, but its quality was still subpar.
What really sealed the deal for the M9, however, were the overheating issues of the Snapdragon 810 processor. HTC had the tremendous bad luck of being the first OEM to run into highly publicized issues with Qualcomm's flagship processor. LG, Sony, and others also had to deal with it, but it was HTC that took the brunt of the fiasco. The company's handling of the problem was rather poor, but to its defense, there wasn't much HTC could actually do about it.
Cher Wang takes over
By June, it was becoming clear that the M9 was a disaster for HTC. In its June quarterly earnings, the company revealed it was going back to red, with expected net losses of more than $250 million. Tellingly, a big chunk of the losses was attributed to a "one-off impairment for idled assets and some prepaid expenses." HTC booked manufacturing capacity worth $90 million that it never got to use due to the M9's poor sales performance.
Soon after the announcement of the M9, Chairwoman Cher Wang announced she would take over as CEO from Peter Chou. It was a momentous event, even if HTC tried to minimize its importance. After more than a decade at the helm of the company he co-founded in 1997, Chou was stepping down, in what could only be seen as a quiet admission of defeat. Chou stayed with the company as head of its "Future Development Lab," though his actual attributions were unclear.
From her first public statement as CEO, Cher Wang signaled a shift in focus for HTC. The company that had been synonymous with smartphones was to stake a claim for itself in the field of virtual reality with the Vive, a VR headset co-developed with gaming powerhouse Valve. Vive and other "connected products" have been touted as HTC's next growth engine ever since, with smartphones curiously taking a back seat.
Too many Ones
HTC spent its summer releasing an assortment of One variants. There was the M9+, with a fingerprint scanner and a Quad HD screen; the larger One E9+, made out of plastic; the One ME, a plastic M9+ with a different camera; and the M9(s), a MediaTek-powered version with minor cosmetic changes . To be fair, at least in the West, the M9 remained the one, true flagship. Nevertheless, the wave of objectively superior models that HTC released in Asia frustrated users in the US and Europe, and confused pretty much everyone.
By fall, HTC was losing confidence. Its shares were so cheap that its market capitalization was smaller than its cash reserves, meaning that for investors on the Taipei exchange the company's assets were effectively worthless. In October, the company said it would stop issuing guidance for upcoming quarters.
Who copied whom?
It was clear that HTC needed a fresh take, and not only on the financial side. The designs the company put out throughout 2015 were stale and repetitive. Some much needed change came with the A9, a sleek mid-ranger that launched in the US on October 20. The 5-inch device drew a lot of inspiration from the iPhone, though HTC execs were quick to claim that it was Apple who copied HTC all along. Despite the controversy, the A9 generated some good vibes, that were somehow dampened by the $499 price tag.
The full extent of the disaster that 2015 was for HTC was visible on January 6, 2016, when the company announced a 35% drop in sales compared to 2014, which wasn't very good either.
To sum up, 2015 brought HTC a new boss (but not really), a flagship that did more harm than good, massive financial losses, and almost no bright perspectives.
2016: "HTC will never disappear"
On Christmas Eve 2015, Cher Wang took some time to talk with the press about the remarks of Reuters columnist Robyn Mak, who predicted that HTC would be one of the mobile brands that would die in 2016. Wang, whose personal wealth is estimated at $8.8 billion, said that "HTC will never disappear" and that she had faith that the market could still grow. In an accompanying statement, HTC boasted that it holds a technological lead in VR and in smartphones.
So, where is HTC heading in 2016?
M10: starting over
It's tempting to think that 2015 was truly rock bottom and that HTC's fortunes can only improve from here onwards. But that's what we thought in 2015, and in 2014, and in 2013…
On the smartphone front, HTC needs a clear and immediate winner with the M10. Rumored to launch sometime after MWC 2016, the M10 – also known under its codename Perfume – is said to feature a 5.1-inch AMOLED display, a Snapdragon 820 processor, and a front-mounted fingerprint sensor similar to that of the One M9+.
The most interesting rumored spec is in an area where HTC struggled over the years – the camera is said to be a 12MP model, featuring a homegrown UltraPixel sensor. While we can't say anything in advance, this sounds like a risky bet. The M8's UltraPixel camera was one of its few real weaknesses. Has HTC managed to up its camera game to compete with Samsung and LG?
Perhaps more important than what's inside the M10, is its design. It would be almost absurd for HTC to come up with another iterative design. There have been no leaks claiming to show the M10 so far, but the company gave us a hint in October, when HTC Asia president Jack Tong announced the beginning of a "different and fashionable phase" starting with the A9. Does that mean the One M10 will look like the One A9? Probably not, but we can expect something very different from the played out M9.
It's not what you sell, it's how you sell it
The One M10 has to be really good, but that won't be enough to make it a sales hit. HTC needs to take a close look at its marketing department, in dire need of fresh ideas. To be fair, it's not a good time to try new ideas, not with a global slowdown affecting even the mighty Apple and Samsung. Then again, HTC doesn't have much to lose at this point, and looking at some of its marketing efforts from 2014-2015, it can't get much worse.
There's a whole discussion to be had about the place that HTC can occupy in a smartphone industry that is commoditizing fast. Perhaps it would be best for HTC to give up any delusions of grandeur and embrace a niche position, focusing on a small number of exquisite devices that stand out from the crowd. It's not like HTC has a big market share or steady revenues to protect, and niche players can thrive even in a highly commoditized market.
If HTC decides it still wants to go after the general market, it needs some clarity. In 2015, the slew of devices it put out was downright confusing, even for tech bloggers. Customers appreciate options, but when it gets hard to tell products apart, you have a problem.
VR pioneer
HTC made its name as one of the pioneers of the smartphone industry, and in 2016, it's obvious that it aims to be one of the first big VR players. Virtual reality seems poised to finally become mainstream, with compelling products from Oculus (Facebook), Sony, Microsoft, HTC/Valve and others.
Early reactions to the Vive headset have been largely positive, and HTC can rely on Valve to bring expertise in the field that will make or break VR – gaming. If the Vive is well received when it launches this spring, HTC may get the rare opportunity to transform itself. It's not hard to imagine HTC even giving up on smartphones to focus entirely on VR. It wouldn't be the first time the company pivots.
However, we don't know yet if people will actually want to strap monitors to their faces and go about exploring virtual worlds. Even if VR does take off as the next big thing in consumer electronics, HTC is going against some of the biggest tech companies in the world.
A great user experience is not a guarantee that Vive will be a hit. HTC knows that all too well from the smartphone industry. One rumor put the price of the Vive at $1500 – if that pans out, only the most enthusiastic early adopters will find it appealing. And there's the problem of getting developers to create software for the platform. In a recent survey, most game developers said they were working on the Oculus Rift platform, followed by Gear VR, and Google's lowly Cardboard, with HTC's Vive coming in on fourth place. Sure, things can change once devices finally hit the stores, but it looks like Oculus already has a leg up on Vive.
Murky waters
Beyond smartphones and VR, HTC's outlook is less defined. There has been talk of an Android Wear smartwatch from HTC for over two years, but it looks like that project is dead. HTC did team up with Under Armour to create a wearable as part of a connected fitness set, but the market is awash with fitness trackers and it's hard to believe HTC will find any kind of traction here. On the tablet front, the Nexus 9 turned out to be a wasted opportunity, as HTC did not follow up with a tablet of its own. The RE camera is an interesting little gadget, but it's not going anywhere either.
Perhaps the most exciting rumor we've heard about HTC's 2016 product lineup is a report about two Nexus smartphones that the company is supposedly working on together with Google. A successful Nexus device can be very beneficial for its manufacturer – Asus, LG, and Huawei are good examples. On the flip side, HTC gained almost nothing from the Nexus 9. Let's hope that, provided this Nexus rumor is true, HTC will fare better this time.
In this series:
Wrap up
HTC is one of the most interesting companies in the Android ecosystem. In terms of sales, it's not even in top 15 globally. Still, people are passionate about HTC, and that can't be said about larger companies like LG, Huawei, or Lenovo. Nostalgia is a key reason why we hold on to HTC and why we all hope to see a comeback. But it's not just nostalgia – HTC has always tried to bring something special to the table and the world of Android would be poorer without it.
Despite a chorus of pundits predicting its death, HTC could survive in 2016 and beyond. The question is, will we know it as a phone maker or something else?
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