HTC turns to China

HTC will target China's growing appetite for smartphones and introduce a five-inch flagship in the West in an attempt to reverse its decline, it said as it revealed a gloomy outlook.

The Taiwanese firm was an early beneficiary of the smartphone boom in the West but has gradually seen its share eroded by stronger competition, especially from Samsung, which now leads the Android market it pioneered.

HTC said its first quarter revenues could tumble 17 per cent compared to the previous three months, worse than analysts had predicted. Profit margins have fallen to almost zero.

HTC peaked in 2011, according to IDC, with 10.7 per cent of global smartphone shipments in the second quarter. It now has less than 4.3 per cent and has fallen out of the top five manufacturers.

Analysts doubt that 2013 will be a turnaround year for HTC as the power of its brand lags far behind Apple and Samsung.

But some have said that the next version of its flagship smartphone, a five-inch device code-named "M7", which they expect to be launched in the middle of this month in New York and London, could give the company the advantage of a few months headstart on features such as higher-resolution cameras. It will be introduced at press events on 19 February.

As well as Samsung and Apple, HTC faces pressure from the Chinese giants Huawei and ZTE, which are both ramping up their plans to become major consumer brands. Despite this, HTC said it will target the lower end of the market in China.

Chief Financial Officer Chang Chia-Lin said HTC, which has tended to rely on developed markets for most of its revenue and in China has focused on mid- to high-end models, was now ready to offer smartphones priced less than 1,999 yuan (about £200) - currently its cheapest phone in China.

"We're going to go down, but not below 1,000," he said. "We see there's still room to play" in 1,000 to 2,000 yuan phones.

Samsung recently warned that the growth of the smartphone market in the West was slowing down and that it too was looking to the developing world. Apple is meanwhile still rumoured to be preparing a lower-cost version of the iPhone for China.