HTC thinks China is the way out of its troubles, with custom OS

Photo: foreignaffairs.com

The WSJ reports that HTC is now working on a custom smartphone operating system designed specifically for the Chinese market.

HTC Corp is developing a mobile software system specifically for Chinese consumers, people familiar with the project say, as part of a big China bet that the Taiwanese smartphone maker hopes will help revive sliding sales.

While the reality is likely to be some kind of Android variant, rather than a completely new OS like Samsung’s Tizen, it does have all the hallmarks of a somewhat desperate move by a company which somehow manages to combine a superb flagship handset with less than stellar financial performance. With morale faring no better, it had even been briefly suggested that HTC might have been planning to exit the smartphone market.

China is a juicy target for all smartphone manufacturers, as China’s emerging middle-class create a market beyond the largely budget handsets that currently make up the bulk of sales in what is now the world’s largest smartphone market. Even Apple, which has so far been content to operate exclusively at the top end of the market, appears to be eyeing China in particular with the iPhone 5C it is expected to announce on 10th September.

But it would be a gamble for HTC, ploughing resources into a country in which it is currently nowhere. A recent Canalys report into smartphone market shares in China showed that HTC was buried somewhere in ‘Other’.

The WSJ suggests thatHTC may be playing the long game, viewing the move as a diplomatic one rather than hoping for short-term financial benefit.

The project is seen by HTC insiders partly as an effort to forge political and business ties in China, since third-party operating systems have little chance of actually competing against the dominance of Android and Apple’s iOS. In the second quarter, Android held 79% of the global smartphone market, while iOS snagged 14.2%, according to market research firm Gartner. No other operating system captured more than 4%.

If so, the question remains what HTC’s strategy is to ensure that it has a long-term.