HTC: Why did the "pig" that was once on the cusp of the trend fail to fly?

In response to rumors that HTC will be acquired not long ago, Wang Xuehong said in an interview with the media that she would not sell HTC, but would acquire peers in the industry chain. We know that HTC has been hovering at a low point for two years, and has suffered losses for several consecutive quarters. Both its marketing strategy and market strategy seem chaotic. Compared with 2011, HTC's current market value has evaporated by nearly 80%. After Wang Xuehong returned, in order to make up for the shortcomings in marketing, three chief marketing officers were replaced one after another. But in the last two quarters, HTC seems to have signs of revival. For example, in the second quarter of 2014, it finally turned losses into profits, with a net profit of nearly 100 million US dollars. In the third quarter, HTC continued to make profits. So the question is, will HTC's future move towards a turning point for revival, or will it continue to slide into the abyss unstoppably?

HTC’s decline turning point: standing at the top of the trend, but lacking core competitiveness for a long time

If we go back to 3-4 years ago, we know that HTC was once very successful, but what was the reason for its success at that time? In my opinion, the rise of HTC around 2010-2011 was mainly due to the fact that HTC stood at the top of the development trend of smart phones at the right time. HTC became Google's earliest partner and the first mobile phone manufacturer to join the Android camp. At the same time, compared with Nokia and other manufacturers, HTC was a smaller new company at that time, and it did not have the burden of old technology accumulated in the era of feature phones. It was more lightweight and flexible. Standing on the shoulders of Google and leveraging the popularity of the Android system, HTC was able to grow rapidly.

After the rapid popularization of the Android system, HTC ushered in its most glorious moment around 2010. In 2011, HTC's market value once reached 33.5 billion US dollars, surpassing Nokia to become the second largest mobile phone manufacturer after Apple. At that time, HTC launched products such as Desire, Butterfly, and New One, which won the favor of a wide range of mobile phone users. But since then, HTC has ushered in a turning point of decline.

In 2013, HTC fell into the abyss at an unprecedented rate. In the first quarter of 2013, HTC's financial report showed that HTC's net profit dropped by 91.5% month-on-month. In fact, at this time, HTC's supply chain shortcomings had already been exposed. For example, HTC held a press conference in the United States in early 2013 to release the HTC One, and planned to start selling the phone in early March.

However, it later faced a shortage of camera supply, which resulted in the phone not being sold in many global markets as planned, greatly affecting HTC's overall plan and brand image.

On the other hand, in early 2012, Apple launched a patent lawsuit against HTC. Apple's goal was to prevent Google Android from gaining a foothold in the market, and at the same time prohibit Android manufacturers from using Apple's intellectual property to gain market success. HTC, which was in the limelight, received a fatal blow. At that time, HTC had just released its flagship model One X, but quickly lost the patent lawsuit with Apple. HTC's products, including One X, were banned from sale in North America, and HTC's decline began to accelerate.

The reason for HTC's decline is clear here. That is, HTC does not have irreplaceable core competitiveness, whether it is hardware or software. Moreover, supply chain and core patent technology have long been HTC's shortcomings. For a mobile phone manufacturer that does not have any genes in the software ecosystem, the importance of supply chain control and patents is naturally self-evident. You know, the ability to control the supply chain is enough to support the brand premium of a mobile phone manufacturer.

Let's look at Apple. Apart from the core competitiveness of its software ecosystem, which is centered around its iOS system, advertising, brand marketing, channel construction, and supply chain management are all important driving forces behind Apple's rise and popularity. Apple is able to penetrate into the development, production, and manufacturing of all upstream components of mobile phones, and through non-core business outsourcing and patent cross-licensing, it firmly controls the supply chain, which consists of a powerful ecosystem consisting of chips, operating systems, software stores, component suppliers, retail systems, and App developers.

The competition vacuum of low-end value networks has been filled. HTC's move to the low-end market may overdraw its brand premium

It can be seen that HTC followed Apple and Samsung to impact the high-end market, but it has long been constrained by the shortcomings of the supply chain and patent links. From another perspective, HTC has not really recognized the reason for its rise. In fact, HTC's rise is not based on the core competitiveness of software and hardware, but because it is at the forefront of the development of smart phones. It may be more appropriate to explain it with Lei Jun's theory of "pig on the vent". HTC is exactly the pig on the vent. As the earliest member of the Android camp, HTC faces a vast smart phone market that has yet to be developed and has a huge demographic dividend. HTC took the lead and adopted the strategy of sea of ​​machines to effectively circle the first batch of market users. But as mobile phone manufacturers such as Xiaomi, Samsung, and Sony joined the Android platform with all their strength, HTC's advantages disappeared immediately.

It is well known in the industry that HTC, which lacks core competitiveness and does not have a brand premium in the high-end market, gave up the "sea of ​​​​machines strategy" and instead reduced its model numbers to focus on the high-end market. However, the author believes that this mistake in market strategy not only led to its unclear positioning, but also the flow to the high-end market will inevitably have an important strategic impact, namely, according to the view in the book "The Innovator's Dilemma": "The low-end value network forms a competitive vacuum, and attracts emerging companies whose technology and cost structures are more matched with this value network to participate in the competition." In fact, this low-end value network vacuum has now been filled by domestic manufacturers.

Here we are more likely to think of Xiaomi. Xiaomi's software and hardware integration model with MIUI system as the core is more in line with the demand of the low-end market. It attracts more users to join Xiaomi's software ecosystem. The time when HTC withdrew from the low-end market was exactly the time when smartphone hardware had basically developed to the top. According to Moore's Law, hardware had become cheap at that time, and the difficulty of producing a mobile phone hardware was not much different from that of assembling a PC many years ago. Xiaomi's entry was not a disruptive technological innovation, but a disruptive business model. The Internet model software and hardware integration ecosystem built by Xiaomi around MIUI just fits the inherent needs of mobile phone users at that time for excellent system control experience and higher cost performance.

At present, Wang Xue has actively started to plan the "recovery of lost ground" action. For example, HTC has focused on the layout of Desire 816, One Fashion Edition, and Desire 820 in the mid-range market, but the question still exists. In the low-end market, will HTC have a chance of winning? We know that on the one hand, it is a helpless move for HTC to focus on the low-end market when the high-end market is weak, and it will inevitably further overdraw its brand premium. On the other hand, domestic manufacturers such as Xiaomi and China Cool Alliance have been fighting in the mid- and low-end for a long time. They have a more thorough understanding of the user experience and needs of mid- and low-end models, cultivate a certain user loyalty, and have a deep understanding of Internet marketing methods. They control online and offline channels, and their technical capabilities in hardware are also gradually improving. HTC has almost no differentiation advantage and channel cost advantage, and HTC's control over the supply chain is not enough to support its low-end strategy.

User needs have changed, but HTC is bucking the trend

On the other hand, HTC no longer has better marketing strategies and brand influence to reverse its decline in the mid- and low-end markets. Gartner analyst CK Lu once pointed out: "HTC does not know how to produce low-priced mobile phones. Such a concept does not exist in the company's DNA. HTC does not know how to be different in terms of cost or differentiation. It usually downgrades high-end smartphones, which does not work." In addition, we know that Xiaomi's ecological model of building a hardware-software integrated ecosystem by focusing on cost-effective prices is destructive. In the low-end market, traditional domestic manufacturers are even unable to compete with Xiaomi. HTC has obviously missed the opportunity to fight in the mid- and low-end markets. We know that at the current stage of the development of smart phones, functions, appearance, design, control performance and experience, system UI, price, etc. have become important competitive factors. However, HTC does not have any outstanding highlights in the above-listed advantageous territories. At present, the market structure, degree of competition, and user demand factors have all changed. In other words, the times have changed, but HTC is still in the same place.

Back to the beginning of the article, Wang Xuehong said that HTC will acquire peers in the industry chain in order to bring the most cutting-edge technology and the best content to consumers as quickly as possible. However, HTC's revival depends on its cutting-edge technological innovation and the performance supply of mobile phone hardware to match the needs of current users, but this does not seem to be easy for HTC. For example, HTC now seems to have been stuck in the alley of "photography". We can see that the HTC M8 EYE only replaced the rear 4-megapixel camera with UltraPixel technology with a mainstream 13-megapixel camera. And there are more reports that the HTC M9, which will be released in February next year, will also play three-proof, and it will be a full metal body, but it turns out that Sony's three-proof mobile phone is not popular with users. It can be seen that HTC is still deviating from the core needs of users and the trend of the times in terms of micro-innovation of mobile phones.

HTC's signs of recovery stem from a short-lived boom caused by its high-end mobile phones entering the mid- and low-end markets

A better chance for HTC to revive is that Samsung is currently facing a decline, which is not only an opportunity for Xiaomi, but also an opportunity for HTC. At least for now, HTC has shown a positive attitude, such as the UltraPixes technology adopted by HTC and the optical zoom technology adopted, which also conveys that it still has the ability to innovate. The team led by Wang Xuehong is also working hard to solve the supply chain problem.

We see that Apple, which is at the peak of its success, is now facing the dilemma of an innovator. Although the launch of iPhone 6 still has a good market sales, it does not mean that the future still belongs to Apple. It only means that, at this stage, no disruptive model can leverage Apple's ecological model. In other words, the future market structure is not clear. HTC still has a chance, but it is just a chance, because whether it is a camera phone, or the core competitiveness of the supply chain, brand premium, hardware innovation ability, software layout, HTC has not produced products that meet the expectations of the outside world. HTC still has too much homework to do and too many loopholes to fill.

But on the other hand, even mature companies have the possibility of genetic modification. Nokia, at the advent of the digital age, overturned the rules of the game set by the then ruler, Motorola, in the era of analog mobile communications. Nokia abandoned Motorola's mobile phone research and development centered on voice quality, and instead focused on the functions, appearance, and ease of use of mobile phones. It developed and designed different mobile phone products for different groups of people to rapidly expand the market. However, in the era of smart phones, the rules of the game changed again. Nokia and many traditional manufacturers retreated to the starting line, and Nokia's advantages became a burden. The strategic passivity caused Nokia to fall into the abyss step by step.

At present, the past glory has become a burden for HTC, which requires HTC to break the current inertia of thinking. At this stage, from all aspects, it shows that HTC is facing many difficulties. We know that HTC has been entangled in marketing issues. For example, hiring Paul Golden, a former marketing executive of Samsung, as an advisor to Wang Xuehong and finding Robert Downey Jr. as an endorsement can show that HTC has begun to exert efforts in brand marketing, but in fact, marketing is not the most fundamental problem. From the above analysis, HTC's future is not clear. HTC's signs of recovery are due to the short-term prosperity caused by its use of high-end mobile phones to sprint the mid- and low-end markets, and this approach cannot guide HTC's future path. HTC's control over the supply chain is not enough to support its low-end strategy, and the high-end market is not feasible. The software ecosystem is almost zero. The HTC Sense UI, which once represented the top level of Android UI, has been criticized by users for its extremely chaotic design style and interaction logic since 5.0. And many problems such as supply chain, marketing strategy, channel layout, and patents need to be solved by HTC.

From the perspective of the general direction and historical experience, it depends on the accumulation of future technology to achieve qualitative change from quantitative change. When the rules of the game of smart phones change, HTC will have new opportunities, and of course this is also an opportunity for domestic manufacturers. However, the fate that pure hardware manufacturers cannot escape is Moore's Law. One possibility is that they will become software vendors. HTC's future is not fundamentally different from Sony and Samsung. It will either sell products in this field and shrink its product line, or enter a new hardware field and continue to expand new product lines. HTC's future is not on the track of recovery, but full of crises.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.