In the highly competitive smartphone industry it’s easy enough to make a name for yourself, but it’s a lot harder to make a profit while doing so. Apple and Samsung have long captured the lion’s share of the profits thanks to their flagship smartphones, which has forced the other handset vendors to fight for their own market share and profits. Due to the success of the duo, rival vendors have been focusing on an area where those companies are not as entrenched in (or not present at all in): the entry-level phone market. This is the traditional volume play, and while it can be profitable on the whole, the razor-thin margins and heavy competition from other vendors make it a similarly tough environment. And now it looks like there will be one less vendor competing in that market, as HTC has let it known that they will be exiting the market for entry-level phones.

Earlier this week in the company’s quarterly earnings call, in a bit of a blink-and-you’ll-miss-it moment that the crew over at Phone Scoop picked up on, HTC announced that they would be leaving the entry-level phone market over the year in order to focus on more profitable segments of the smartphone market. Undertaking what amounts to a gradual draw-down, HTC is not discontinuing any phones or discontinuing support for those phones, but they will no longer be developing phones for the entry-level segment. Which means that when phones like the Desire 10 series reach the end of their natural retail lifetime, HTC will not be replacing them with newer models.

HTC’s struggles with profitability over the years are well known. While the company is and continues to be a major player in the smartphone market, they have been squeezed on all fronts; Apple and Samsung split the bulk of the high-end market, and meanwhile the company faces extremely stiff competition at the entry-level from Chinese OEMs, whom are very difficult to compete with on price. As a result, rather than trying to make the volume play work with the entry-level market, HTC has decided to focus on the more profitable mid-range and high-end markets.

The challenge now for HTC will be clawing market share from Samsung and other vendors in those more profitable spaces. While the mid-range and high-end markets are easier to make a profit in – consumers aren’t so price sensitive and there’s more to a phone’s price than just its bill of materials – it’s still a difficult task since vendors still need to move phones in some volume in order to cover the R&D costs of these better phones. The good news for HTC is that the company appears to be on the right path in terms of handset design after the HTC 10, but and the end of the day they still need to overcome consumer inertia and convince potential customers to leave Apple/Samsung.

Finally, HTC’s exit of the entry-level market means that the company expects to introduce “six or seven” new phones for 2017. We’ve already seen their first two phones with the HTC U Play and HTC U Ultra, which were introduced at CES and will be aimed at the mid-range and high-end markets respectively, and these will be joined by other phones throughout the rest of the year.  

Source: Phone Scoop

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  • webdoctors - Saturday, February 18, 2017 - link

    Its not just the low end, even midrange is quite crowded. You've got Huawei, LeEco;s $200 phone with a Snapdragon 820 SoC and also Xioami. If you want something non-Chinese, you can get LG G4 or other phones for dirt cheap in new condition off Ebay.

    Its a really cut through business to be a phone manufacturer right now and the only guys making money are Apple and Samsung (who makes the parts for Apple as well as for themselves like the SoC, screen, DRAM, battery etc.)
  • zodiacfml - Friday, February 17, 2017 - link

    This is just the start of a slow decline as the competition who produce their own hardware are relentless while the emerging brands produce excellent devices at lower costs.
  • flyingpants1 - Saturday, February 18, 2017 - link

    OnePlus 3T is better than any phone HTC has ever made.

    These companies should all go out of business.
  • zodiacfml - Saturday, February 18, 2017 - link

    I wouldn't say it is better but is a lot more exciting.
  • gvanberkel - Saturday, February 18, 2017 - link

    Perhaps to make room for pixel phone production.
  • LordConrad - Saturday, February 18, 2017 - link

    I will not be buying anymore HTC phones unless they get rid of the offscreen buttons, or include an option to turn them off. Whenever I use someone's phone that has offscreen buttons I'm always hitting them by accident.
  • Retired Budget Gamer - Monday, February 20, 2017 - link

    I thoroughly enjoyed the One S on T-mobile US for 2 years, except for the horrid battery life and overheating issues that were common in smartphones in those years.

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