Virtual Reality Room

On January 2, smartphone maker HTC made its first official announcement of 2020. Rather than announcing a new handset, the briefing focused instead on virtual reality, an alternative business line for the Taiwanese tech giant. That announcement—introducing the multiplayer fantasy-adventure game Sanctum for visitors to its Viveland VR gaming centers—might be a harbinger of HTC’s 2020 strategy: playing up its VR gaming gear and, to hear analysts tell it, shifting focus away from its traditional core product line of smartphones.

That reshuffling of priorities has already happened over the past few years, as HTC has expanded its footprint in VR headgear and backend hardware while releasing fewer flagship handsets.

“We expect HTC to continue to launch new smartphones and 5G networking devices, but there will be no flagship smartphones,” says Eddie Han, senior industry analyst with the Market Intelligence & Consulting Institute in Taipei. “This is because HTC is set to focus on emerging application services built around augmented reality, virtual reality, blockchain and artificial intelligence.”

An HTC planning head hinted in November that the company might reanimate an older smartphone, but he didn’t say whether that would be a flagship or one of its many lower-end models.

“I have not heard much about HTC making a comeback with a breakthrough smartphone offering, so I don’t see a turn of events for HTC on the smartphone side,” says Kiranjeet Kaur, senior research manager with the market research firm IDC.

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Strap this to your head and go fight evil

Viveland arcades have spread from Taipei, near HTC’s world headquarters, to the biggest city in southern Taiwan and Hong Kong. Crowds still gather in Taipei on weekends to pay more than $20 for half an hour of virtual car racing or avoiding banshees on a walk through a virtual haunted house.

That’s one result after four years of VR hardware development that started with $799 headsets designed to rest comfortably over the eyes and adjust for weight and grip. Now the company sells a wider range of Vive-branded gear and VR software, and for business use as well as the gaming market. It announced four advances at the CES tech show in Las Vegas this month. One of those, the Pro Eye headset, won a CES “honoree” award. Judges found it had “advanced” eye-tracking functionality within the headset—a first for widely available devices and a boon to enterprise users looking for what they called a more “intuitive experience.”

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HTC vies with Facebook’s Oculus Rift and Sony PlayStation as head-mounted device shipments across brands is due to reach 100 million by next year, 10 times the number logged in 2016. Competition comes down to price, says Neil Mawston, executive director of wireless practice with market research firm Strategy Analytics in the U.K. “We think price cuts or cheaper VR models will be a key strategy for HTC in 2020,” Mawston says. “Virtual reality headsets have not taken off as well as hoped, partly due to expensive pricing.”

An HTC spokesperson said in early January that the timing wasn’t right to discuss product releases planned for this year. The company lost NT$2.36 billion (about $79 million) in the third quarter last year. The past four years were sort of the same. HTC at one point laid off 1,500 employees. Another 2,000 workers left when HTC sold its design team to Google for $1.1 billion. Its market share peak of 10.7% in 2011 had dropped to below 1% last year, according to IDC.

“It remains to be seen whether these new application services contribute a large share to its bottom line over the year,” Han says.

Smarter strategy than hawking smartphones

HTC will probably keep making smartphones this year, but mostly—if not entirely—at low prices, even for 5G models, analysts believe. To stand out, some of the experts say, those phones might be aimed at specific markets such as India or use niche technology such tools for cryptocurrency trading.

The 23-year-old company’s smartphone market share fell as rival Android handset developers crowded it out of the market and consumers cut back on handset purchases overall in 2018 and 2019.

HTC could launch from five to 15 “main” smartphone models in 2020, up from five in 2019, so CEO Yves Maitre can prove himself in case VR gear doesn’t bring in a lot of money, Mawston says. Maitre, a former executive vice president of the French telecom operator Orange, took the HTC job last year after Taiwanese business scion Cher Wang left.

“HTC will need to find a killer model for smartphones or VR headsets,” Mawston adds. “HTC needs a blockbuster product to recapture the world’s attention. Without a hit design, HTC’s profits and growth will continue to bump along the bottom.”