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HTC sells another factory, will use the money to fund VR

Smartphone pioneer HTCis accelerating its pivot towards virtual reality. The company will sell one of its remaining manufacturing facilities and invest the funds into its fledgling VR business.
By
March 16, 2017

Smartphone pioneer HTC is accelerating its pivot towards virtual reality. The company will sell one of its remaining manufacturing facilities and invest the funds into its fledgling VR business.

HTC will sell its 114,000-square-meter (28-acre) factory in Shanghai to a company called Xingbao Information Technology. The transaction, which also includes a plot of land, will bring HTC630 million yuan, which is approximately $91 million. For reference, HTC’s operating loss in the last quarter was around $117 million.

The transaction will “fulfill the company’s operational adjustment needs and assets activation,” according to the release put up by HTC. The company told Taiwanese media that the money will be put into its “expanding VR business.”

The sale of the Shanghai factory will not impact HTC’s smartphone business, the company said.

Established in 2009, the facility mainly produced phones for the Chinese market. At its height in 2011, it churned out two million mobile devices every month, but starting in 2013 most of its assembly lines went out of production due to decreasing demand. Rumors about a sale of the Shanghai facility first emerged in August 2015, but HTCdenied it planned to offload it.

Facing dwindling sales, HTChas been cutting workforce and closing down production lines for the past five years. The company outsourced much of its production to contract manufacturers like Compal Electronics or Wingtech.

In December 2015, HTCsold another factory, situated in Taoyuan City, Taiwan, for $183 million. The phone maker has three remaining production facilities in Taoyuan.

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The situation seems dire for the former industry leader. In spite of drastic cost-cutting measures, HTChas been bleeding money for years now. The contract to manufacture the Pixel and Pixel XL for Google doesn’t seem to have helped much, but that shouldn’t be a surprise given that five months after their release the Google phones are still not consistently in stock.

The remaining hope for HTCseems to be virtual reality. The Vive VR headset has been selling reasonably well, with an estimated 450,000 units shipped in 2016. But despite the initial hype, VR didn’t explode into the mass market phenomenon that would allow HTCand its competitors to thrive. Still, HTCseems focused on VR as its new growth source, while smartphones are almost an afterthought in the company’s public communication.