Market Insight

HTC needs more than One device to turn around its fortunes

March 26, 2014

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HTC is hoping to build on the well-received HTC One with its new flagship smartphone which shares more than just a name with its predecessor. The new One M8 also shares the same industrial design as the previous One and many of the key features such as dual front facing speakers and infra-red blaster.

The new One does come with a range of hardware and software improvements, mostly notably a dual camera arrangement for capturing depth of field information, as well as introducing a new version of its Android UI, Sense. The major software change to Sense not it’s new look, but that many elements of Sense such as the Gallery, and HTC’s Zoe camera will now be stand-alone apps that get updates via Google Play rather than as part of a broader upgrade package. The aim here is to be able to update these services quicker as well as shortening the development time needed to push out new versions of Android to the device.

Our take

  • HTC is keen to point out that the old One was the most awarded smartphone last year. It takes particular pride of its design language; retaining this for its new flagship. Beauty alone will not be enough to save HTC. Despite delivering arguably the best smartphone of last year, shipments still dropped 28% to 22.4m while the smartphone market overall boomed to over 1bn devices. This is down from a peak of 45m in 2011. The company also posted its first ever quarterly loss in the third quarter of 2013. The problems for HTC do not lie in its product. The main issues revolve around marketing, brand awareness and missing the boat on many new industry trends.
  • HTC is hoping to address one of the key issues by retaining much of the same branding from last year’s flagship. It is clearly aiming to gain a halo effect from the old One’s collection of design awards. Retaining the name also saves HTC some money in building consumer awareness of the product name. There may be some confusion among consumers and even retail staff, so HTC will need to invest significantly in retail education.
  • HTC concentrated on the high end of the market in 2013, but as it and every other manufacturer discovered this segment of the market is reaching saturation. The new HTC One is a great device, but HTC’s future depends just as much on the mid-tier HTC Desire 816 that was announced at Mobile World Congress. While it may not have the scale of a Samsung or a Nokia, there are many Android manufacturers operating on the same scale as HTC and operators are desperate for a viable alternative to the Apple-Samsung smartphone duopoly that exists in many Western markets. There is a fierce battle between HTC, Sony, LG, Nokia and up and coming brands like Lenovo or TCL Alcatel OneTouch to establish a clear alternative to Apple and Samsung.
  • Unlike almost many of its competitors in the Android space, HTC lacks any smart peripherals to pair with its handsets. HTC has promised a smart watch is coming in the second half of 2014. In the meantime, its lack of smart accessories could be a big factor in its battle with the Samsung Galaxy S5 and the Sony Xperia Z2.
  • HTC is trying to undercut its rivals by launching the device immediately. Samsung’s Galaxy S5 launches on April 11th and HTC will be keen to press this advantage. This windows is short however and IHS is sceptical this will offer much benefit for HTC.
  • The Duo camera offers a clearly differentiated experience for consumers and crucially one that is both easy to understand, demonstrate in store and use. Image sensor size has been a battleground for vendors in the past couple years with manufacturers offering 16MP, 20MP and even 41MP cameras on smartphones. HTC is sidestepping this battle entirely and offering consumers something very different.

Overall, IHS believes HTC still has some way to go to turn things around. Its products over the past couple years have been good but sales have continued to decline. It cannot compete with Samsung’s marketing budget and now is in danger of being left behind in smart wearables and other peripheral devices too. IHS forecasts that HTC shipments will be flat in 2014 at 22.8m devices. 


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