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HTC pins hopes on China to avoid becoming the next Nokia

Michael Kan | Oct. 16, 2013
Its fortunes in the West having stumbled, HTC is looking to the massive China smartphone market to keep it in business.

Complicating matters is that demand in the country is being driven by low-end Android phones, some sold for 1000 yuan (US$163) or cheaper. Historically, HTC has gone in the opposite direction and sold high-priced phones. Its other flagship handset, the HTC One, starts at 4488 yuan without subsidies.

HTC has offered some phones for price-conscious buyers since it entered the Chinese market in 2010, and on Tuesday it did so again. Alongside the One Max it unveiled several new midrange phones in its Desire series. The handsets range from 1500 yuan to more than 2000 yuan and will launch soon.

The lower-end phones recall comments by HTC CEO Peter Chou in July, when he said HTC would introduce new midtier and entry-level phones as a way to regain market share.

But selling lower-end handsets can only go so far in supporting a smartphone business. Rivals such as ZTE have conceded that profits in the Chinese market can be hard to generate, when popular low-end phones yield thin margins.

As a result, ZTE is trying to boost its profits selling higher-end phones in the U.S. -- the opposite recovery strategy of HTC. But unlike the Taiwanese company, ZTE has a bigger business in networking that can help bankroll its smartphone efforts. The same is true for Lenovo, a PC vendor, whose smartphone business in China only recently became profitable.

HTC's real challenge might be to achieve visibility in a market that has more than 100 smartphone brands. It's relying on China to sell more handsets but the local competition is strong, said Melissa Chau, an analyst with research firm IDC.

"It faces a very real risk of being lost amongst all the Android players," she said.


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