Forget the One (M8), it’s the Desire line that may actually save HTC

by: Bobby SitukangpolesApril 8, 2014

HTC Desire 816 aa 6
So the HTC One (M8) is out, the reviews are in, and I think we can say that, just like the previous model, it is easily a candidate for this year’s best smartphone. That means HTC is saved, right? Not so fast. They have been down this route before.

But making the best smartphone in the world had not bailed HTC out of its financial troubles.

The original HTC One was introduced in February 2013, and by April it had hit most markets in the world. By the end of September, according to ABI Research, HTC’s global market share was 1%. To put that into perspective, 1% is the same market share as that of Xiaomi, a three-year old startup that at the time was only operating in three markets, one of which is a city state smaller than New York.

How could this have happened?

The New York Times thought that it was down to their marketing. However, I beg to differ. I believe HTC’s biggest mistake was its failure to compete in emerging markets.

In January, research firm Gartner reported that the majority of smartphone sales growth in 2013 came from the emerging markets. Many analysts agree that this trend is going to only get stronger in the future.

Let’s use the fastest growing smartphone market in 2013, India, as a proxy to understand what has been happening in these high growth markets. The following figure shows the top smartphone vendors in India in Q3 2013 which was the first full quarter in which the HTC One was available in the market.


If marketing was the most important piece in HTC’s failure last year, why is it that Micromax and Karbonn were the two companies hot on Samsung’s tail in India?

Those who spent some time in India last year would notice that Apple had been making a strong marketing push in the market. Yet Apple’s figure is lingering close to the relegation zone, while Micromax and Karbonn’s figures combined is as big as Samsung’s and 14 times the size of Apple’s.  Furthermore, according to IDC, Apple was kicked out of the Indian top 5 list of smartphone vendors in Q4 2013.

Understanding emerging markets

To understand HTC’s challenge, one needs to understand the defining features that differentiate developing markets from mature markets.

First is the total absence (or at least limited impact) of carrier subsidy. Smartphones in these markets are sold at retail directly to end users just like microwave ovens, cars, and pretzels.

The second characteristic was first pointed out to me by an India-based analyst, Sameer Singh, in what he called “usage-based smartphone segmentation”. Basically, consumers who are in the market for low-end devices are looking to get their first connected device. Typical use case scenario for consumers in this bracket are communication, social networking and light media consumption.

Meanwhile, those looking to purchase midrange devices are looking to not only replace their old phones but also to replace their netbooks as their only personal connected device. Thus, to attract these type of consumers, devices have to fulfill the typical roles of a smartphone, but also be good at performing tasks that in the past were associated with netbooks. This explains the rapidly rising popularity of low-cost smartphones but also of phablets in these markets, as reported by IDC.

Combining these traits with the low average income prevalent in these regions, we can build a picture of how the average emerging market consumer view smartphones based on their prices, and where HTC’s 2013 offerings sit in these markets.

1. The low end

Smartphones available for under $250 belong to this category. This is the segment in which non-phablets can be expected to be successful in the emerging markets. You might have heard how Nokia’s Lumia 520 enjoyed quite a success in the emerging markets last year. This was the reason why. This also explains why after tax, the Moto G is selling for around $210 – $240 in the emerging markets, which means that it sits inside the price bracket where such a device can be expected to gain the most attention.

Motorola Moto G aa 8

The Moto G has put Motorola back on the map

In India, local manufacturers like Karbonn were bringing quad-core devices into the sub $200 segment, while HTC practically went AWOL.

2. The mid-range

The segment covers devices priced between $250 and $500 off-contract. This is the segment in which most of the rapid growth of phablets happened. In India, local manufacturers made a strong showing in this segment with both Micromax and Karbonn offering 720p phablets for around $300. Elsewhere in Asia, regional players like Lenovo flooded the market with phablets that had 720p screens and quad core processors with price tags between $270-320.

Samsung’s Galaxy Grand might have caused confusion among critics in the developed markets, but from the emerging market’s perspective, it allowed Samsung to have a phablet device that was available for under $50 more than alternatives from local and regional players. Sure enough, it quickly became the affordable phablet to beat.

galaxy grand 2 press

With its mid-range specs and Note 3 inspired design, the Grand 2 is the phone to beat in emerging markets

HTC had three models in this price bracket. The Desire 300, Desire XC and the Desire 600. Looking at their specs, primarily their 4 to 4.7-inch WVGA screens, it’s easy to see why none of these devices have made a splash.

3. The high-end

As we have demonstrated above, this is the least important segment in terms of looking for growth in the emerging markets. Consumers in this segment not only have significantly higher purchasing power but also access to various financing plans. This means, they are the least sensitive to pricing, as the difference between purchasing a $550 phone and getting an $850 one is less than 50 bucks if they buy the phone under a 12 months financing plan.

This is why the HTC One Mini did not do much to help HTC in 2013. At $520, from the perspective of high-end emerging market consumers, the 4-inch phone was competing against  the Galaxy S4, the iPhone 5, even HTC’s own original One.

HTC One Mini

The One Mini was too expensive for the experience it offered

Why HTC’s new Desire phones are probably HTC’s most crucial models this year

HTC’s failure to understand the needs of buyers in fast-growing markets was one of the primary culprits of its problems throughout 2013.

The good news is that, unlike last year, HTC now has devices with the potential to turn its fortunes.

But the One (M8) is not one of them.

Think of the new HTC One (M8) as the Mercedes S Class. It’s okay to build something that is a proud demonstration of what is currently possible. However, the majority of Mercedes-Benz models sold is the C Class, not the S Class. Without generations after generations of competitive “affordable” models, Mercedes would have probably ended up being a small niche player. This is why Autocar magazine thinks that the new C Class is Mercedes’ most important model.

This is also why HTC’s new Desire 610 and Desire 816 are keys to HTC’s survival.

And, from the look of it, the Desire 610, with its quad-core Snapdragon SoC and 4.7-inch display, has a good chance to shake things up in the sub $250 segment.

Competition in the low-end bracket is certainly harsher this year, with the availability of devices like the Moto G, Nokia X phones, as well as updated models from regional players. However, the Desire 610’s design pedigree, as well as its widespread brick and mortar availability, may hopefully sway some consumers down HTC’s way, if it’s priced right.

HTC Desire 610 All Colors

HTC Desire 610

Meanwhile, competition in the mid-range bracket has not been standing still either. Everyone’s brand-to-beat, Samsung, has updated the Galaxy Grand with specs that are now on par with the competition. The $380 Galaxy Grand 2 now comes with a 5.25-inch 720p screen and quad-core Snapdragon 400 chipset.

Nevertheless, the Desire 816 still has a good chance to compete. Specifically, compared to the Galaxy Grand 2, HTC’s Desire 816 still has some competitive advantages that could pull consumers away from Samsung’s grasp.

HTC Desire 816 aa 2

HTC Desire 816

Like the Desire 610, its design is inspired by what is arguably the world’s best built smartphone. That design also comes with HTC’s signature front facing speaker setup, which consumers who consume lots of media will surely find attractive. It also has a larger screen than the Grand 2. Considering how consumers in this price range are big on getting the most computing potential from their investments, having a bigger screen should certainly help HTC’s cause.

However, just like with the Desire 610, all this is reliant upon the assumption that HTC will set the Desire 816’s price to be competitive in the lower mid-range segment (under $400).

The worst thing for HTC to do is to set this phone’s price the way it set the One Mini’s in 2013.

The Desire 610 and Desire 816 are not the only ones with the potential to turn HTC’s fortunes this year.  HTC also has a Mediatek powered device that’s set to hit the world’s biggest smartphone market, China, very soon.

It is clear that HTC now has the devices that could allow them to take advantage of the rapid growth of the developing markets, which is a far cry to what they had last year. If HTC can price them competitively, these phones could be HTC’s much-awaited get-out-of-jail card.

  • We are the six point four percent!

    Micromax and Karbonn make crap phones. I have seen a dual core Micromax suffer in a game where my single core Xperia E shone: Subway freaking Surfers.

    • Shark Bait

      That’s mediatek for you!

  • Shark Bait

    HTC make good phones, they must have a good design department but a terrible sales department. Their marketing has missed the beat for years, and they consistently miss growing markets, they should be all over china. A brand popular in the west but made in the east, should be liquid gold. They need a bog strategy change, and I agree, the desire line could lead this

    • They just need to have a Desire to change. (rolling on the floor, laughing)

      • MasterMuffin

        Someone needs to talk some sense into them

    • Alex Cuaron

      Ya, lets hope the Desire is the One..

  • dandroid13

    No, just let them die, HTC is irrelevant anyway…

    • nytimes

      looks like you were looted by HTC in the past…

  • xlSamsonlx

    The reason I’m leaving HTC is because once the they think they’ve got something better to work on they ditch their older devices. In the case of the evo 4g lte, only four months passed before they started neglecting it. When they do roll out updates they tend to be buggy updates.

    TL;DR good hardware, bad support

    • BenGezarit

      Yup, they thought they can do whatever they like and we still gona buy the phones.
      I had always HTC phones till ICS. Then i saw how they cut every inch and rely that you buy them anyway. Middle range had something that flagship didn’t etc.
      Apple to much?????

  • rob

    The one is not what people want stop saying it is the best. The best is what people want.

    • addthebad

      Its what I want

      • Ram

        Thats just u…

  • N4

    Everyone want the best but unfortunately, only a few percentage of the buying public can afford it.

  • Ishaan Malhotra

    Trust me, Indians don’t know what they’re buying.

    • Ram

      Agreed. Most of them just fall for two things – Price and verbal promotion of the salesman. So in low and mid range segments the best way to get success is keep price as low as possible and give the salesman as much margin/earning as possible…

      • Ishaan Malhotra

        I know. I saw someone buying a gionee phone over moto g, costing the same. He bought it because of the 8mp camera

  • lMarcus

    Sell Desire 816 at $300 or less I’ll buy it instantly no kidding
    HTC make good build quality phone but their pricing strategy doesn’t make sense
    Someone in HTC really need to get fired

  • Alex Cuaron

    Such a shame that a phonemaker as good as HTC has to suffer such atrocities. Hope the Desire line rakes in gold for them.

  • RemoveTheBranding

    They could remove that ugly branding at the bottom of the screen that would make it look nice.

  • Mf Lye

    OMG … must resist this phone!!!!!…. argh…….

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  • Noel

    I will begin by saying i love HTC and i am one of those who is positive they will be around for a long long time contrary to many who think they will be gone in a few years cuz of their current wows. But as one who hates huge bezels and wasted space on phones..i will send a shout to my beloved HTC to lay off “them” bezels…i mean if they gonna make big phone they better be prepared to have at least a 75+% screen to bezel ratio. Case in point a beauty like the One M8 would have been the best phone at least in terms of looks bar none if not of wasted space (huge bezels). The only bezels on that phone should be the BoomSound speakers with only minimal bezels to hold the screen in place. Just looking at the pic of the desire phone above…i can’t believe the amount of bezels. HTC has to pledge to wage a war against huge bezels..they should also slim down the BoomSound speakers.

  • Cedric

    Htc desire 816 owners or owners-to-be, be apprised that lollipop upgrade takes 7gb on this 8gb phone. Enough said.