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China Times: Plight of Taiwan's high tech industries

2012/08/18 18:45:58

Smartphone vendor HTC Corp., which was once the most valuable company on Taiwan's stock market, has suffered a sharp decline in sales recently.

Founded in 1997, the company was initially a manufacturer of personal digital assistants. It later shifted to smartphone manufacturing and established its own brand in 2006, with its global market share reaching 16 percent at one point.

A string of setbacks experienced by the company since 2011, however, has sent its market share and revenues plummeting. The market value of HTC shares, meanwhile, has evaporated by nearly NT$900 billion, down from NT$1,300 per share in April 2011 to NT$250 at the close of trading Friday.

The result can be attributed to a number of shortcomings in the company, which have been fully exposed amid the intense competition in the global smartphone market. In fact, the plight of HTC reflects the problems faced by Taiwan's high tech industries as a whole.

Though good at manufacturing, HTC has a weak patent portfolio. As a result, the company has been sued numerous times by Apple Inc., leading to its products being held up at the U.S. border in May this year.

Among the world's major smartphone makers, Apple and Google have set up their own operating and back-end service systems to create their respective "mobile ecosystems." Microsoft, meanwhile, is also working toward that direction after entering a strategic partnership with Nokia. Even Samsung has its own operating system, known as Bada.

But HTC does not have any of these.

Compared with the high and durable profitability of software products, hardware products turn out only low and short-term profits and are easily replaced. This is demonstrated by the fact that Apple enjoys a gross margin of over 50 percent on the iPhone, as well as the rebirth of IBM following its transformation from a hardware seller into an IT services provider.

Instead of urging people to buy HTC products, our government should help the high tech industries overcome their shortcomings. (Editorial abstract -- Aug. 18, 2012)

(By Y.F. Low)