HTC’s announcement that the company going to focus on lower margin, mid market smartphones illustrates the maturing of the phone marketplace.
Smartphones have been a huge, and immensely profitable, business for cellphone manufacturers however the devices are now becoming a commodity as the high end western markets become saturated and cheaper devices start to enter the marketplace.
Having been comprehensively defeated in the high end marketplace by Samsung and Apple, Taiwanese manufacturer HTC hopes to make money in the lower end of the market.
For HTC it’s questionable how profitable these cheaper markets will be; rebates to telcos and distributor markups tend to eat up most the margin while pushing up retail costs.
The biggest factor of all though is the entry of newer Chinese businesses into the market, it’s going to be a tough for the Taiwanese manufacturer to compete with these suppliers.
Even Apple and Samsung are being affected by the slowing demand for high end smartphones.
HTC’s dilemma would be familiar to most electronic manufacturers; the high end of the market is a narrow niche – the premium smartphone market, like PCs, is dominated by Apple – while the other suppliers fight not to find themselves locked into the commodity end of the market.
For HTC the trap is not to fall into the commodity trap; although it’s hard to see how they’ll do this in a smartphone market that’s increasingly becoming a low margin, high volume game where, like the PC market, there is no middle ground.
2 thoughts on “Avoiding the smartphone commodity trap”