Pressure on HTC could lead to phone price war

Anyone who's not sure if the phone industry operates like the fashion business, should check out HTC's latest numbers. While they may have been the darlings of the high-end Android phone revolution, Apple's total dominance at the high end of the market might force a serious re-think in Taipei. KitGuru buys a steaming bowl of noodles and listens in on traditional Chinese conversations.

Having begun life as the company that made the XDA Windows phone for O2, HTC (formerly High Tech Computer) then repeated the trick with T-Mobile, before deciding that it wanted to branch out on its own and create a name for itself.

With success came a movement away from Microsoft – toward the new Android OS that was being touted as the best route to ending Apple's domination of the world. Founded in 1997 by Messrs Wang, Cho and Chou – in October 2008, HTC launched the world's first phone based on this new OS concept, the HTC Dream.

While all those around them spent a lot of time, energy and resources on creating phones for the low end of the market (think Phones4U), HTC continued to develop into the Desire market – where quality and features rule the day. For almost 2 years, that strategy has worked really well. Until now.

Waking up to the Xmas results has caused a bit of a headache in the company's Taoyuan City HQ.

On the one hand, HTC's collaboration with rap producer and mega star, Dr Dre, has produced the hugely successful Beats range of headsets. But the core business of telephones has struggled.

Quantifying the level of struggle is simple. HTC is down almost exactly 20% year on year. Extra pressure comes from the fact that this market is, overall, booming. Any drop, means that Apple/Samsung etc are all doing better than HTC would have hoped.

December revenues have fallen, in real terms, from almost $1.1 Billion in December 2010 to just $870 million in 2011.

KitGuru says: Knowing what's coming in 2012, in terms of Nokia, Samsung and Microsoft – plus the possibility of Blackberry joining that group by being acquired by Microsoft, HTC knows that the pressure is on. But there is an easy solution. Instead of clinging to the high-end, simply accept that the Phone4U market is bigger – and produce cheaper handsets for the masses. Let's see if Nokia and HTC pass each other on the quality slope this year.

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