In 2013, electronics company HTC splashed $1billion (£800 million) on a glitzy marketing stunt. The 'Here's to Change' advertising campaign, which featured a Huge Tinfoil Catamaran, a Hipster Troll Carwash, and a $12m (£9m) cameo from Avengers star Robert Downey Jr.
At the time, the Taiwanese tech firm was trying to bounce back from the disappointing release of the HTC One smartphone, which won industry awards but sold fewer handsets than Samsung’s more lavishly promoted Galaxy S4. HTC hoped the campaign would re-establish it as a global leader in smartphone technology, but instead it was the beginning of the end.
Downey Jr. has since moved on to the Chinese smartphone company OnePlus, and Chinese consumers have been just as fickle. In May, HTC announced that it was withdrawing from Chinese e-commerce platforms Alibaba and JD.com. Globally its share of the smartphone market has gone from 10.7 per cent in 2011 to 0.05 per cent in 2019. In the UK, HTC no longer sells handsets in Carphone Warehouse, O2 or EE stores, meaning that its phones are only available from Amazon or the HTC website directly.
So what happened? Current and former HTC employees paint a picture of tough business decisions in a challenging market, combined with misjudged innovations, and a difficult corporate culture.
The products were good. In 2012 HTC's One X was touted as “by far the best Android phone in AT&T’s lineup”. But the second half of that quote tells part of the story of the company's downfall.
The decision to offer the One X as an AT&T exclusive in the US was one of a series of carrier-related misfires; later down the line, with persistently lacklustre sales, carriers became reluctant to take on HTC phones at all and in 2017 the U11 was only available with Sprint. This shrunk HTC’s audience even further and saw its share price tumble from $42 (£33) in 2011 to $1.30 (£1.03) today.
Several HTC insiders said that the company may have misjudged its pricing strategy. Jeff Xue, a former virtual reality software engineer at HTC Vive in Shenzhen, said that before HTC’s retreat from China, it was offering a smartphone with a 2018 configuration for 3,999 RMB (£462), whereas Chinese technology company Xiaomi offers a more up-to-date model for 2,499 RMB (£288): “Why spend 3,999 RMB on last year’s mobile phone?”
According to Xue, HTC’s offering was a result of being stuck in a vicious cycle where poor sales figures in China – due to competition from domestic competitors such as Xiaomi and Huawei – meant that the company was placing orders for lower numbers of components from its suppliers, pushing up the unit prices of its smartphones. A former HTC community moderator, who asked to remain anonymous, made the same point, but noted: “consumers will not know [the reason for the higher prices], they’ll compare the selling price, that’s all”. The moderator also pointed to HTC’s poor after sale service in China – there is only one official repair shop in the whole country, in Shanghai.
"HTC is recognised broadly for its ability to rapidly innovate and execute on new product categories," Paul Brown, vice president of corporate strategy and business development at HTC says. "We have an active input cycle both before and after a product is envisioned, and also collaborate with other companies to create customised products, relevant to today’s market." Brown also disputes that HTC's innovations have been out of touch with consumer needs. The company answered questions about its innovations and future of virtual reality but did not comment on further issues.
China, the country with the world’s most smartphone users, is important for any consumer electronics company. But although China sees Taiwan as a part of its territory, the reality is that consumers there are more loyal to mainland companies, especially when they are more competitive on price.
While Samsung and Apple are the most popular smartphone companies globally, the top three spots in China are occupied by Oppo, Vivo and Huawei, with Samsung and Apple being the only foreign brands in the top ten. Darren Krape, a former senior worldwide community manager at HTC, says Chinese companies captured the domestic market, forcing HTC to compete with Apple and Samsung on a global level, where it is “a super crowded market with really tough margins”.
But it’s not just a difficult market that has pushed HTC to the margins. The company's investments in innovation have not paid off. One former employee, who asked to remain anonymous but occupied a global leadership role, pointed specifically to HTC’s “big bet on squeezable input” – in 2017, the company launched the U11, with a unique feature called EdgeSense, an innovation that allowed users to activate certain functions by squeezing the sides of the device, but which some critics described as a gimmick.
HTC's Brown defends EdgeSense, saying that “HTC has long developed technology that set the standard for smartphones and that ultimately became must-haves for the industry,” citing Google’s adoption of squeezable input since the Pixel 2. Google’s adoption of HTC innovations was no accident. In 2017, the search-engine giant bought HTC’s design team for $1.1bn (£880m), recognising that amidst the chaotic deluge of new releases – HTC put out over 100 phones in 2009 – there were some ideas worth pursuing. HTC’s marketing may have been all over the place, but few people have questioned the technological talent at the company’s core.
But successful innovations require effective marketing and, more importantly, the ability to capture the attention of a broad base of consumers who have more choice than ever before. Last year’s HTC U12+ was released with hardly any fanfare. More recently, some are skeptical of HTC’s recently released EXODUS 1s, a cheaper version of its EXODUS 1, which allows users the ability to access the blockchain.
Appealing to crypto fans is part of HTC’s broader strategy to focus on its niche fanbase, rather than compete for mass appeal. But the community moderator said that these offerings were overshadowed by HTC’s broader shift towards more expensive virtual reality products, which alienated the company’s core fans.
It’s not just fans who have been alienated. The former employee who challenged HTC’s squeezable input said that the company suffered from an “abject failure of leadership” and that the smartphone division was run with a culture of “fear and intimidation”. Reviews on Glassdoor suggest that there have been other disgruntled employees. One former employee writes that “the company is unbelievably secretive internally” with “a lack of trust between HQ and the rest of the company”. But many other reviews are more positive, and the company has an overall rating of 3.2 out of five.
The success of its VR offering, the HTC Vive, demonstrates a viable future for the company, but it's not embracing the message of its own 'Here's to Change' advertising campaign. In June, HTC surprised analysts by announcing the Taiwanese launch of two new mid-range devices. The company's decline has been long, slow and painful, but it hasn't given up on the smartphone game just yet.
This article was originally published by WIRED UK
