HTC’s plan for another round of job cuts in Taiwan illustrates just how far the once mighty smartphone maker has fallen behind its rivals, and some analysts see few apparent prospects of that changing anytime soon.
The Taipei-based smartphone maker announced on July 2 that it would lay off 1,500 workers from its manufacturing division, about one-fifth of its total workforce, HTC said in a filing to the Taiwan Stock Exchange. The job cuts come as no surprise given its long decline since 2011 when its share of the global smartphone market peaked at 10.7%, according to IDC. The research firm says HTC now only accounts for about 1% of the market.
“This is like a nightmare that keeps dragging on for HTC,” says Bryan Ma, devices research vice president with market analysis firm IDC in Singapore.
String of losses
HTC’s notice to the exchange said the staff cuts would help it achieve “organizational optimization” of its manufacturing units through a “strategic adjustment of human resources.” The company said it could also make further staffing decisions based on seasonal changes in the markets where its products are sold.
The move to reduce its workforce is in line with HTC’s recent shift toward outsourcing more of its factory work to save money, according to an analyst with Taipei-based market research firm TrendForce.
The company had been planning the layoffs as early as last year, says Eddie Han, senior industry analyst with the Market Intelligence & Consulting Institute. But he thinks eliminating workers who are responsible for production rather than engineering will “not significantly affect HTC’s overall survival,” he says.
The last time the company made similar cuts to its workforce was 2015, when 2,300 jobs were lost. It was also the same year that HTC was removed from Taipei’s blue-chip stock index. The smartphone maker reported a net loss of NT$16.9 billion ($560 million) for 2017, which was its third straight year of failing to turn a profit.
HTC also changed its leadership in 2015. Chairwoman Cher Wang replaced her cofounder Peter Chou as the company’s CEO. Chou was said to be focused on developing new products for the company, as part of HTC’s strategic shift toward targeting the mid-tier smartphone market under Wang’s leadership. She also said that she wanted to improve HTC’s image in overseas markets to help it gain back some of its lost market share.
Wang’s late father was Wang Yung-ching, the chairman of plastics and petrochemicals conglomerate Formosa Plastics. He had with an estimated net worth of $5.5 billion when he died in 2008. Her husband Wenchi Chen is the CEO of VIA Technologies. Their combined wealth peaked at $8.8 billion in 2011.
In January, HTC formally sold part of its design division to Google. That deal saw 2,000 workers leave HTC to join its long-term partner in software-hardware projects such as the Pixel phones and Nexus tablets.
The crux of HTC’s losses stem from the fact that an early lead in Android phones that began in 2010 was gradually lost to Samsung as well as a slate of Chinese brands that outperformed the company through their marketing and sales channels, analysts have said over the years.
“HTC’s strength has always been in engineering and design, which is what made it successful in the early years. But they got outgunned in terms of marketing, and this is precisely what is still holding them back today,” Ma says. “Its product design is still world-class, but it has struggled to monetize that with its limited presence in such a competitive environment.”
Can virtual reality be real?
More recently, HTC has been turning to virtual reality (VR) gear and other devices beyond smartphones to bolster its revenue. VR equipment, which sells to gamers under the name Vive, appears to offer some hope for a recovery. “We can predict that it will adjust its deployment in the smartphone industry and the importance of VR will likely to increase in the future,” Han says.
Vive’s 500,000 shipments last year accounted for the third largest share of the global market for VR gear, TrendForce says. Sony and Facebook held the top two spots. The Taipei-based research firm says total shipments across all brands came to 3.7 million units in the same period, and it expects the market to grow to 5 million this year.
Although the VR market is showing some promise, TrendForce cautions that it won’t be enough to make up for the decline in HTC’s smartphone sales anytime soon.