HTC stand

HTC can compete with Samsung but not Apple

HTC may currently be working on a plan to separate the design and manufacturing of its devices. The troubled smartphone maker is currently battling against a decline which has seen the company recently post its first ever loss.

Such a move would leave HTC aping Apple’s business model. Although the company currently has extensive manufacturing facilities in Taiwan, as well as a smaller Chinese operation, it cannot compete with an operation that has the scale of Samsung.

The speculation comes from a Reuters report which states that HTC has closed down a fifth of its manufacturing capacity. This was denied by HTC Chief Marketing Officer Ben Ho, who said that the company has merely adjusted its output according to current demand.

“Like any manufacturer, we do volume planning to optimise our lines, our manufacturing and production facilities,” Ho told Reuters.

There is a big difference between shutting down manufacturing lines in preparation for outsourcing to a third party, and simply reducing manufacturing output due to falling demand.

According to Reuters, HTC is looking to contract some future manufacturing to FIH Mobile Ltd International, a subsidiary of Taiwan’s Hon Hai Precision Industry. And HTC Chief Executive Peter Chou does not rule out separating device design from manufacturing.

Uncoupling design from manufacturing could well be a smart move for HTC. The worldwide smartphone supply chain is currently dealing with overcapacity issues, and the design-lead model is proving very successful for Apple, the world’s 15th biggest company according to Forbes’ Global 2000 list.

Products like the HTC One have been critically acclaimed, yet disappointing sales and issues with component suppliers have left the Taiwanese manufacturer in the red. Therefore, given HTC’s relative product design strengths and manufacturing weakness, there is certainly rationale behind the company focussing on the area in which it has been most successful recently.

A product design-focussed business, however, would be much more reliant on its brand, and HTC does not currently attract the recognition enjoyed by Apple. And with Chou eager to stress the premium nature of HTC’s offering, there would be new challenges managing the outsourcing process, to ensure production quality is maintained.

It is possible that even after agreeing outsourcing deals, HTC may retain some manufacturing capacity. The company has recently been linked to manufacturing deals with third parties.

The likes of Amazon and Lenovo are thought to be looking to expand their presence in the mobile device market. Deals with HTC could accelerate their progress, given the Taiwanese company’s in-house expertise.

[via Reuters]

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