HTC shrugs off Apple battle

Android smartphone vendor seeks killer device that challenges rivals

The Chinese mainland is going to be a key market for Taiwan-based smartphone manufacturer HTC Corp in a bid to help it turn around its fortunes on the world stage in 2013. The company has achieved steady progress in the Chinese mainland since it entered the market two years ago.

HTC, once the world's biggest Android-based smartphone vendor, went through a tough year in 2012. The company's market share in North American and European markets shrank substantially after it ended up in a patent lawsuit with Apple Inc.

HTC's financial figures failed to gain confidence from investors last year. Its net profit plunged to its lowest point since 2004, down 91 percent year-on-year to $34.5 million in the fourth quarter. However, HTC remained a profitable smartphone maker for every single quarter last year. Few players, except for Apple Inc and Samsung Electronics Co, achieved the same result.

"HTC's development in the Chinese mainland is well on track and is in line with expectations," Ray Yam, president of HTC China, said in an interview with China Daily. HTC is a latecomer in the Chinese mobile phone market. The company officially entered it in July 2010.

The mainland market received the least negative impact from HTC's legal battle with Apple, Yam said. The company's market share in China grew to 5.8 percent in the third quarter last year from 2.8 percent a year before, according to Beijing-based research firm Analysys International.

"HTC is gradually recovering from Apple's lawsuit. We have already seen a light from the long, dark tunnel," Yam said. Since HTC settled the patent case in November last year the company's high-level management, including Chairwoman Cher Wang and Chief Executive Officer Peter Chou, are likely to refocus on products and operations. "Therefore, more resources will divert to Chinese mainland market expansion," Yam added.

The Chinese mainland is surpassing the United States to become the world's biggest smartphone market. According to an IDC report, Its smartphone shipments reached a record high and broke past the 60 million mark in the third quarter of 2012. The figure was more than three times the country's PC shipments during the same period, the report pointed out.

After two years of operation in the mainland, Yam said HTC had proved several practical strategies and would copy the successful approach in the future. "First of all, we figure out how to closely cooperate with the mainland telecom operators and help them make deep-customized smartphones," Yam said.

In April last year, HTC cooperated with China Unicom (Hong Kong) Ltd to launch its first entry-level smartphone - the four-inch HTC Desire V - to mainland customers.

In addition, Yam said HTC had partnered with different mobile Internet companies to form a micro-ecosystem in which people work together and develop cutting-edge technologies and products with new customer experiences.

"To discover a sustainable development method in the mainland is the most important achievement for us," Yam said.

When it comes to distribution channel construction, Yam said HTC slowed the pace of opening brick-and-mortar stores because it noticed the significant rise of e-commerce sales on the mainland.

"More people are turning to the Internet for mobile phone purchases, which forced us to change our marketing strategy," Yam said. HTC had about 3,000 branded counters by 2012, reduced greatly from the previous goal of 4,000.

Li Yanyan, an analyst at Analysys International, said HTC could benefit most from e-commerce business. "HTC lags behind Samsung and Nokia in its number of physical stores but online outlets may help HTC narrow the distribution gap with its rivals," she said.

The company stepped up its pace to construct a self-owned e-commerce store and cooperate with third party online retail giants such as 360buy.com and Taobao.com. "The online platform can easily reach customers in tier 2, tier 3 cities, areas where HTC has not much of a presence," Yam said.

Sandy Shen, an analyst at Gartner China, said the most severe challenge for HTC's business in the mainland is the lack of unique products that appeal to customers. "Compared with Apple's iPhone and Samsung's Galaxy series, it seems HTC has not come up with same-level, popular handset models."

For worldwide smartphone vendors, the importance of the Chinese mainland cannot be overstated, especially for companies such as HTC that reached a crossroads. "The scale of the mainland smartphone market just blows you away. Never has there been one market that exerted so much influence," said Wong Teck-zhung, a senior market analyst at IDC Asia-Pacific.