Can VR Save HTC?

摘要: HTC has dropped to the bottom on the chart of market share in the smart phone sector. Worse still, the company doesn’t really have much advantage in the VR industry, an emerging industry HTC seems to be obsessed with.

(Chinese Version)

After the glorious February, HTC entered the blue March.

On the MWC (Mobile World Congress) in February, HTC launched the pre-sales of its VR headset product Vive VR globally. In less than 10 minutes, the Taiwan-based company was able to get an order volume of over 15,000. Thanks to the enthusiasm of the market, HTC’s share price rocketed from TWD 80.3 (around 16 RMB) to over one hundred, even hitting its peak of TWD 136.5 (around 27 RMB).

Recently, HTC released its fiscal report of February, which shows that the company’s revenue reached TWD 4.2 billion (around 840 million RMB), making the lowest record of February in the last decade (a plunge of 35% compared with January and a 55% drop on year-on-year basis).

The once dominant power in the smart phone sector had also lost its edge in the market. HTC’s market share in Chinese mainland has slumped to less than 1%, making it truly a fringe brand in the smart phone world. Additionally, its fiscal reports had been dissatisfying for several quarters and the company had dropped out of the Top 50 Brands of Taiwan chart.

HTC’s falling grades inevitably make people wonder how far the company can go with VR (which has boosted HTC’s share price), the emerging field that has become HTC’s new main focus.

HTC is actually in disadvantage

In early 2016, the 57-year-old CEO of HTC, Cher Wang, didn’t comment much on the failing smart phone business in an interview. “Now we have to be more practical. HTC will put more resources and personnel in more fields,” Cher Wang said, showing her positive opinions of the company’s VR business. “Indeed, the smart phone sector is very important. But the potential of wearable and VR products has outpaced that of smart phones.”

On many sales charts provided by statistical agencies, HTC couldn’t even make it to the mainstream brands nowadays. And in the VR market, HTC doesn’t have much edge either.

In the current VR market, the top three giants, OculusRift, HTC Vive and SONY PS have set the price for their products and the launch time. Companies that target the low-end market such as Samsung and Google have also started to penetrate the market.

In the VR sector, Oculus, literally as the forerunner of the VR field who started the VR wave, has natural advantages. Its consumer-level products were backed by content developers even before the launch.

According to GDC’s survey on 2,000 developers, 19% of them picked Facebook’s Oculus VR as their first choice of platform, 8% chose Samsung’s Gear VR, 7% went for Google’s Cardboard while HTC Vive and Sony both accounted for 6% of the total number.

Furthermore, 77% of developers expressed that they might try Oculus Rift in the future while 50% would try Cardboard, 30% would try Gear VR, and 20% would try Playstations VR. Only 19% of developers said they would try HTC Vive.

It’s easy to tell that in the early development of VR industry’s ecosystem, the core drive of the industry lies in the application support of the developers. In this case, HTC doesn’t posses much advantage since it lags behind the other four mainstream brands. It’s a common sense in the industry that content is the key to boost the market. After all, without content, VR devices are all just a bunch of machines.

It’s important to note the fact that VR products rely on other devices to function.

In the high-end sector, VR products need PCs with extremely advanced specs; in the low-end sector, or the smart phone VR sector, brands that have a large market share will definitely have the upper hand. In this sense, HTC doesn't really have much advantage.

HTC’s direct competitor, Sony, has sold 36 million PS4s, a number three times larger than the PCs that meet the spec requirement to use high-end VR products. The amazing part is, Sony is selling more of them. That’s also why the general public believes that in the early stage for the VR industry Sony would be the early winner.

HTC’s indirect competitor Samsung has a large user base in the smart phone sector. Its VR product Gear VR, geared towards smart phones, has a sales performance that’s hard to come by. That being said, compared with Samsung and Sony, HTC doesn’t have enough supporting devices for its VR products or a matching user base.

What’s more, the market is still far from mature as the cost stays high. Price is one of main factors that have profound impact on competitiveness.

Before HTC’s launch, Oculus Rift had been criticized for its high price (USD 599, around 3880 in RMB). And on the recent MWC 2016, HTC announced that the product was priced at USD 799 (5176 RMB), a price much higher than the former.

To put it in perspective, to play games with Oculus or HTC Vive, the gamers would need a high-end PC that has a video card not lower than the level of GTX 970. According to statistics from Steam, only 5% of Steam’s users meet this basic requirement. A GTX 970 video card can cost over USD300 (around 1943 RMB), meaning that it’s quite expensive for ordinary users to be able play VR games.

Apart from that, according to the user manual of HTC Vive, users have to find a minimum space of 5 ft by 6.5 ft indoors free of obstacles. Besides that, the users also have to install two base stations diagonally from each other above user’s height, which means you would have a house first to play HTC Vive. In this case, the cost for the users to use HTC Vive would be over ten thousand RMB.

Compared with that, Sony’s PS VR is priced at USD 399 (around 2585 RMB), which is an appealing price for many entry-level users. Besides the affordable price, PS VR only requires a PS4 to function. And for that, the 30 million PS4 users are PS VR’s potential consumers. Even if just 5% of PS4 users buy PS VR, it would be a shipment of 1.5 million. In this case, PS VR has an incredibly positive prospect compared with other VR devices that target high-end users.

Furthermore, the launch time also plays a great role. Sony will start shipping the products in October, which will definitely put Sony in disadvantage. As for Oculus, the company will start shipping soon and release 30 game titles altogether.

So will HTC fail again?

Despite all those disadvantages, you will understand that HTC really is betting on VR to make a transformation if you look back into HTC’s history.

Started as an OEM, HTC has gone from a PDA and smart phone OEM to an innovator and once the forerunner of android phones. The company had successfully made it to a renowned brand in the android industry with its extraordinary software and hardware. HTC even once surpassed Nokia and became the only phone maker that could compete with Apple besides Samsung.

At present, the golden age for HTC has come to an end. Even in the phone industry HTC is failing.

In 2012, Bloomberg Taiwan concluded three mistakes that HTC had made that contributed to the evaporation of the TWD 800 billion (around 160 billion): the overly fast expansion in which everyone wanted to be the front-end developer since nobody wanted to do all those tiresome work; the reckless recruitment of foreign talents and buying in Beats; directly compete with Samsung and Apple without proper management while exposing all the disadvantages of the flagship models to its rivals. 

However, besides the problems mentioned above, the neglect of marketing or let’s say inadequate market strategies also contributed greatly to the decline of HTC, which eventually allowed Samsung to surpass HTC.

HTC’s shortcomings shown in its performance in the smart phone industry continue to exist in the emerging VR industry today. Compared with its nemesis Samsung, HTC already lacks behind in the early promotion of its VR products.

Starting from the 88th Academy Awards, Samsung has been bombing the consumers with its VR prodcuts, becoming the new star of VR. Samsung prepared gift bags stuffed with a Samsung smart phone and a Gear VR for all the celebrities that attended the ceremony.

On the MWC 2016, Samsung provided each audience with a Gear VR so as to allow everyone present to experience the VR effect. Samsung even had Facebook’s CEO Zuckerberg promoting the products.

Compared with that, HTC hasn’t been making any impressive promotion campaign in the VR industry and market. So what has HTC been doing? In the past 6 months, the industry noticed that Cher Wang had been selling many things.

In December 2015, HTC sold its TY5 building in Taoyuan to Inventec for TWD 6.06 billion (around 1.2 billion RMB). The deal could bring a revenue of TWD 2.1 billion to HTC.

The same thing also happened to VIA Technologies, another company that’s under the influence of Cher Wang. After 11 consecutive years of loss, the 2015 fiscal report of VIA announced that the company had finanlly achieved profiting once again with a revenue of TWD 823 million (around 160 million RMB). But the fact is that VIA sold its CDMA (Code Division Multiple Access) to its rival Intel for USD 100 million (around 650 million). This deal allowed VIA to have the very first revenue in years since 2005.

At the time when brands like HTC were facing immense difficulties, even Nokia did something similar. And the outcome was obvious.

Despite all the doubts and criticisms, Cher Wang is confident about HTC’s future path. As the forerunner of android phones, HTC tends to believe that the company has already reached the point where it’s impossible for the company to fail completely. Therefore, HTC is seemingly refusing to reflect on its mistakes, trapped in a pit without a way out.

When an enterprise is in its darkest hour, the best thing to do is keep an open mind to the outside world. If the enterprise wants to survive the fierce competition in the market, it has to work all the way to make sure its products will reach its audience. HTC shouldn’t just dwell on the great fantasy on the VR industry.

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[The article is published and edited with authorization from the author @Li Yundie, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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