The majority of phone manufacturers tend to outsource some of the production of internal components to other manufacturers – other companies that specialise in producing these critical components. In many ways, the phone manufacturers’ role is simply to select the best parts for the job in each case; that’s why you can find similar AMOLED screens and processors in both Apple and Samsung products. However, HTC look set to buck the trend, with last week’s revelation of their partnership with specialist chip-manufacturer ST-Ericsson, with a view to manufacturing their own processors for low-end handsets.
ST-Ericsson – who shouldn’t, by the way, be confused with Sony Ericsson – have plenty of experience with designing processors for Android-specific devices, which makes them a perfect match for a company like HTC. By working together with ST-Ericsson, HTC probably hope to cut down the costs of manufacture and production, thereby allowing them to lower the price of their budget handsets. And, as we all know, when it comes to budget phones, price truly is the deciding factor; being even £10 cheaper than the competition can be enough to seal the deal.
Frankly, this makes a lot of sense. HTC have a large portfolio of handsets that fit into the category of ‘Budget Androids’, and yet they don’t fare as well in the market for budget handsets as they do for high-end phones; when the specs of the HTC One X, One S, and One V were announced, it’s no surprise that the press chose to drool all over the One X, with the V barely getting any coverage at all. OK, so high-end handsets are always going to be a little bit more exciting to read about, but HTC have been suffering in the low-end market for some time, losing share to manufacturers like Samsung and Orange, the latter having made a name for themselves by rebranding other manufacturers’ handsets.
One of the reasons why HTC have been failing is price; the HTC Wildfire, for example, which had very similar specs as the Samsung Galaxy Apollo and the Orange San Francisco, was priced at nearly £50 more than both of those handsets. Whether that’s the result of HTC’s failure to keep production costs low, or HTC’s slightly higher profit margins is unclear, but getting the basic cost of a handset down is the first step in being able to address the issue of pricing and profitability. The Wildfire was still a popular handset, and HTC’s good design and appealing skin made it a worthy acquisition to many people; but with prices like that, it’s no wonder the Wildfire didn’t do as well as expected.
Whether this attempt to bring costs down will be successful is anyone’s guess; it may be that HTC have no plans to reduce the price of their budget handsets, happy as they are at being not quite top of the ladder – though it looks likely that any reductions in production costs will be fed back to the consumer. This has to be good news; HTC’s handsets are usually reliable and slick. If their next batch of budget handsets are attractively-priced, the firm could be on to an entry-level winner.