HTC, Manufacturer of the World’s Best SmartPhne HTC One is seeing some headwinds as the momentum for HTC One has slowed and expect its June sales to decline by double digit MoM. We believe the market is overly optimistic about HTC One, ignoring the mature high-end market and Samsung’s aggressive marketing. Although HTC plans to launch several new models, such as the Butterfly, the HTC One mini and another mid-end phone, we believe none of them offer much attraction (price or product differentiation) to carriers.
From 2009-2012, consumers[US & Europe] were chasing smartphone specs (screen size, CPU, battery, resolution, LTE, etc). So the replacement cycle averaged one year. However, as we see few upgrade incentives from 2013, we believe consumers are less willing to upgrade their phones. That’s why we expect competition in the high-end smartphone market to intensify. HTC is still very high-end focused and is not competitive at the low-end due to its cost structure and channel network.
Samsung and Apple’s low-end affordable SmartPhone strategies are likely to bring more negative impacts for both local kings and smaller scale players like HTC. We expect severe competition in the high end to affect HTC’s margin performance.