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HTC and self-determination

HTC’s market cap has just overtaken Nokia’s. While market capitalization is a fickle thing, shifting with sentiment, this is still a remarkable feat. Nokia’s market capitalization has almost halved in the space of a year while HTC has more than tripled from $10 billion to over $33 billion.

If you roll back to 2007 and the start of the modern era of smartphones, you can see how the two companies stocks traded places:

(source: Google finance)

The recession was hard on everybody but HTC soared during 2010 while Nokia never recovered. Markets reward unforeseen growth and typically that means above-market growth.

That’s reflected in the following chart (admittedly units and not profits, but pricing and margins for both have remained relatively steady.)

As Nokia’s growth lagged the market the stock was punished. As HTC’s growth exceeded the market’s growth, the stock was rewarded.

But there are a few more observations to make:

  • HTC’s smartphone business was under-performing the market for most of 2009. In fact, it was even in negative growth for three quarters.
  • The surge in growth coincided with HTC adding Android to its portfolio and given no other changes, seems to be causal.
  • Although not within the time range of the charts above, HTC had another period of rapid growth in the mid 2000s.

A year ago HTC was making excuses and apologizing. Today they are more valuable than the largest phone vendors. All thanks to Android.

But why no thanks to Microsoft?

HTC was the primary Windows Mobile vendor a few years ago. They claimed at one point to have shipped over 80% of all Windows Mobile devices. They were also the leader in the Pocket PC franchise as they were the ODM behind the iPaq brand from HP/Compaq. HTC would not exist today were it not for Microsoft.

The relationship is such that HTC is paying Microsoft for protection from (potential) Android IP infringements. HTC has also licensed Windows Phone though the relationship between Nokia and Microsoft must give them pause.

But that’s the whole problem. Those who live by the sword shall die by it. HTC was a Microsoft dependent and now they’re a Google dependent. As the basis of innovation shifted, HTC was agile enough to make the transition. Perhaps they can execute a portfolio switch yet again as their upstream suppliers change whims or business models.

But then again, as we saw with Windows Phone, perhaps not.

If HTC wants to control its destiny it needs to control its suppliers. Now that its power and brand have grown, it needs software because in their market software is self-determination.

  • http://www.noisetech-software.com/Perspectives.html Steven Noyes

    People question me when I say that Android has been kind to only HTC. Every time I look at HTC, I see a very well run company. They have a specific style and a specific "life" about their products missing from every other handset maker besides Apple. Sometimes their products are a bit rushed IMO, but they really seem to have some good engineers and design. On top of that, they understand their costs and sell products at a price where they make a profit.

    Personally, I see the strength of HTC is wrapping their own UI, HTC Sense, around an arbitrary OS. WP7 does not allow this but WinMo and Android do. I think they could do a good Bada, Meego or any other OS and don't really need their own system to thrive long term.

    • Childermass

      Would having a variety of supplies rather than just one that is promiscuous and fickle truly reduce their exposure?

      Even though they provide a sense of HTC-ness to their products, unless and until they own their own software they are, in effect, not running their own company because they are beholden to others. They do not own their own future. The decisions they make are driven from someone else's boardroom. Not a good place to be.

      • http://www.noisetech-software.com/Perspectives.html Steven Noyes

        You are always beholden to others at some point and no company owns its own future. It is important for each company to find their own way. Personally, I think HTC does a great job with taking someone else's basic software IP and building on it with their own design and experience. It takes a really special company with very special leadership and very special products to succeed as a systems company where you do all the software and all the hardware and all the integration.

        At this point, I do not see HTC being in the position with a broad enough product mix to be able to accomplish this. Likewise, it goes against their primary skill sets.

      • Childermass

        Taken literally, what you say about 'no company owns its own future' has to be true. But I think we can agree that there is a gradual change from 'no ownership' to the ideal 'complete ownership'.

        Apple, as an example, has a high degree of ownership over its future. Dell, nil.

        The one is utterly dependent on 'the world' the other goes some way towards defining it. That is the point here. If you want some form of longevity you fight to gain control over your future. In HTC's case that would mean developing (or buying) its own system. Businesses who declare it is not within their skill set to do that are saying we can't be bothered. Skill sets are as purchasable as commodities (and as HHH points out below there are a lot of options out there). It is the will and the vision that count.

        Vision and will, that is how you control your own future. Perhaps that is what you mean when you say they 'find their own way'.

      • http://www.noisetech-software.com/Perspectives.html Steven Noyes

        "Skill sets are as purchasable as commodities"

        How is that working out with HP? And look at Google's growth through M&A. At the end of the day, only a couple of these M&A's have been beneficial financially. YouTube and AdMob (partially).

        The reality is, with the right management, the right engineers, the right culture, the right marketing it is is possible to be in control of your future like Apple is. But that takes lots of time, money and effort to develop and is not always the best path for the future of all companies.

        In HTC's case, I do not think that owning more of the software stack would be beneficial but I do think owning more of the hardware stack would be. HTC could do an Apple and do their own chip like the A5. Take the Tegra 2 for example. Every Honeycomb tablet that will be announced in the next 6 months will, more than likely, be based on the Tegra 2. There are 2 bad parts to this:

        1) Every company will basically be selling the same tablet.
        2) is the Tegra 2 is not competitive with the A5 when it comes to graphics and the Tegra 3 will be just on par.

        If HTC, being mostly a hardware company, went to owning more of the hardware IP stack, they could do their own Arm based chip and not be held ransom to NVidia, TI, Samsung or Qualcomm. Likewise, they could do better power management and get higher performance being able to target specific hardware features. It also builds into their core competencies in hardware.

      • AdamC

        HTC should start developing their own software and not relying too much on goog because the rug can any time be pulled from under their feet. Now goog is less open and only a matter of time before they decided to charge for the OS because it is a great revenue stream.

        Or these OEM phone makers should form their own alliance and develop and build an OS which they can use without being too reliant on a third party supplier for their OS.

      • http://twitter.com/davidchu @davidchu

        The history of alliances and joint ventures rarely work out because of conflicts of interests. (See Google-Apple)

        The big reason why OEMs wouldn't be able to form an OS alliance of their own is because they are dependent on the carriers.

      • http://twitter.com/davidchu @davidchu

        "The reality is, with the right management, the right engineers, the right culture, the right marketing it is is possible to be in control of your future"

        I can't find the link, but it reminds me of a presentation about how Microsoft had the best software talent for many years, but because of the expectations of their management, the consumer products they produced were subpar.

      • handleym

        "Skill sets are as purchasable as commodities"

        I wouldn't be TOO sneering of this claim. A number of Apple's iconic products began life as "purchases" of outside companies. Obvious examples include
        - iTunes
        - iDVD
        - Final Cut/iMovie
        and let's not forget Pixo's role in the iPod.

        But in every one of these cases, no-one thinks about them as being non-Apple products. I think the issue is that
        - Apple STARTS with a very specific way of doing things. Every engineer within Apple has a feel for the Apple way, and outsiders brought into the company soon learn that way (and, to be honest, it's usually not much of a learning curve, because even outsiders have a feel for the Apple way).
        - on TOP OF THAT, Apple management is not willing to tolerate any deviation from the Apple way, no matter what prima-donna's are involved, or no matter the timelines. So once the acquisition has gone through, the outsiders are given as long as is needed to make their product fit the Apple way — but are not allowed to keep any gratuitous weirdness because "that's the way we used to do things".

        Compare this with acquisitions by other companies. Cisco's various acquisitions all retain their brand names. Google's acquisitions all look completely different from each other. MS' acquisitions frequently ship exactly the same product as they were shipping the day the were acquired, with simply a Microsoft logo slapped somewhere on the splash screen.
        Not to mention, of course, that your company needs to have the reputation as a place where skill WANTS to be, not a place skill wants to flee: consider, eg, the recent Engadget-AOL fracas, though that is a slightly different field. I could imagine, however (even though this sounds mean) that a purchase of a hot new company by MS (or, even worse, Oracle or IBM) could result in the best talent fleeing to start their own company or to join Apple/Google/Facebook.

        I think it IS the case that skill sets are purchasable. But INTEGRATING skill sets into a company optimally seems to be a difficult process that few companies pull off well.

      • davel

        MacOS X/ iOS

        The base is Unix from NextStep with the Apple UI on top.

      • Hamranhansenhansen

        Yeah, they should do their own operating system. Linux, BSD, and WebKit are free. You don't have to go to Google to get them. And with in-house integrated hardware-software design, they can move ahead of Android handest makers fairly easily. They can license Java instead of paying Microsoft to license Android, or even better, do their own C API and make it easy to port iOS, Mac, Windows, Unix, PlayStation, Wii, Xbox, and other apps to the HTC platform.

        If they are replacing the Android interface with their own, why not replace all the generic components of Android? HTC can't get the latest Android source right now, but they can get the latest WebKit.

        In 5 years, do you think any consumer will be impressed by any phone hardware? I don't think so. I think they will all look past the hardware into the screen, knowing that is where all the features are. The hardware is just a handle. If you want it to look different, you put on case. The software is what you are really buying and it is what people are willing to pay for.

      • Sander van der Wal

        If creating your own OS with UI is so easy, why did Nokia fail so miserably with Symbian, Maemo and MeeGo?

      • CndnRschr

        By being too ambitious, dealing with legacy and a lack of coherent vision.

      • Sander van der Wal

        And HTC isn't too ambitious when it is going to pursue it's own OS?

        Nokia at least has had succes with some of their OS'es, and they lso invented a succesful UI (the S40 one), but afaik, HTC has always been using other people's OS'es. Is their ZuI open to third parties?

      • asymco

        It's not easy but it's not necessary to be big (or rich) to be successful. Android was not the result of an enormous effort, nor was iOS and certainly not WebOS. The resources needed for these projects were an order of magnitude lower than what Nokia spent.

        Bada would be another case study.

        But that's all academic. The future of platforms may change radically if/when apps move to HTML5.

      • Sander van der Wal

        How many of the UI's you mention were created by people that had little or no UI design experience?

        HTML5. Sigh. Apple was the last company that tried web apps, and they failed. Nokia tried it, and failed.

        Apps that run on servers, somebody as to pay for these servers. USD 0.99 only buys a lfinite amount of server time. Works for some apps, won't work for others.

      • http://twitter.com/aegisdesign @aegisdesign

        What you've described in your first paragraph there is MeeGo. Linux OS customised for mobile. Webkit built in and the most powerful cross platform development environment in Qt. But, that's not all you need as Nokia have shown already and I would expect HTC to have even less vision than the Finns.

      • Walt French

        No company is an island, either, and for good reason: the principle of declining marginal costs (of fixed costs).

        HTC may be big enough that it can amortize the fixed costs of it’s own OS over enough units but it’s not clear to me what value that’d bring versus the much less costly skin on Android.

        Every firm needs to carefully understand the value proposition of their whole production net so the meme of many no-value-added Androids is important. But arguably HTC is showing that it IS establishing value elsewhere.

  • http://twitter.com/tsahil @tsahil

    Horace,
    It seems clear to me that TC is aware of it, and this is why they are now moving strongly towards cloud solutions – where they see their software opportunities. Building their own OS is rather impossible, or extremely hard; while adding value to customers through the cloud seems like an easier and safer bet.
    They are more agressive/agile at it than other handset vendors, which will probably assist their growth moving forward.

  • http://twitter.com/BrianSHall @BrianSHall

    A touch off topic here but nothing pisses off the Nokia faithful like stating that smartphones were invented in 2007. Nice one.

    • http://twitter.com/treestman @treestman

      Brian,

      He said "modern" smartphones. I don't think it's unfair to say that the iPhone introducing rich text email, a "real" browser that freed us from WAP browsers, and other features ushered in a new era of smartphones. Android, webOS and WP7 (and to some extent BB OS 6) have all been following that path.

      Yes, smartphones existed long before 2007, but there's a pretty clear line before and after that.

      • Sander van der Wal

        Symbian had a real browser too, not just that wap thingie.

        Epoc, Symbian's predecessor, had a real browser, btw.

      • Hamranhansenhansen

        Not real enough. Better than WAP, but not better than a PC. Only S60, which was based on Apple's browser, came close, but it was flawed.

        iPhone had 3 important properties that made all previous smartphones forgettable:

        • PC class operating system (not a baby OS)
        • PC class native C application platform (not baby Java apps)
        • PC class HTML5 Web application platform (not a baby WAP or basic HTML browser)

        When the iPhone shipped, it was not just better in the above regards than all other smartphones, it was better than 90% of PC's. It not only decoded the made-for-PC Web, it did that better than most PC's. It caused Microsoft to have to make IE9 an HTML5 browser so the PC could catch up to iPhone. IE8 is a 2002 level browser at best. IE9 is a clone of the iPhone browser, a clone of Apple WebKit, not a new version of IE8. And iPhone not only ran native C apps, it did that better than most PC's, with a much more sophisticated object-oriented, media rich, rapid development framework. iPhone had a UNIX compatible operating system with OpenGL interface, sophisticated media and other subsystems, no viruses, tremendous reliability. Again, better than most PC's. Better than everything other than the Mac.

        So it isn't just other smartphone makers playing catch-up to Apple, it's all the PC makers playing catch-up to iPhone as well. Because of that, the PC era ended in 2007 and the smartphone era started. Everything since then is a copy of an iPhone or it is an antique. So we need a way to describe that. I think Horace's "modern smartphone" is quite appropriate. Just like Macs and Mac clones are "modern PC's" distinct from the command-line systems only a handful of people used and which most PC users do not even recognize as a PC and wouldn't know how to do anything with them.

        I had an MP3 player in 1999, so I sympathize with proto-smartphone users, but I don't pretend iPod really owes anything to a Creative Nomad that could hold a half a CD in half CD-quality and it took 30 minutes just to get that data on there. You could actually burn a CD and play it in a Discman in about the same time, and it would sound better. iPod comes out of the MP3 players on computers, like iTunes and Audion, more than Creative Nomad. And iPhone comes out of the Mac more than Nokia or BlackBerry. That is why they jumped so far ahead of the market. They are from Apple, the oldest PC maker, they based their media players and smartphones in PC's, not other media players and smartphones.

        And finally, remember that all smartphones go back to Apple Newton, for which the mobile ARM architecture was created, so it isn't like Apple came in during 2007 and stole a decade of work from anybody. A Newton was ARM, flash storage, battery, touchscreen, virtual keyboard, autocorrect, modem, fax, mic, speaker, native apps, modern Web browser for the time, and even cost about the same as today's smartphones, when adjusted for inflation and subsidy.

      • http://twitter.com/aegisdesign @aegisdesign

        Psion's PDA's predate the Newton by some margin as does the Acorn Archimedes with it's ARM processor.

        It's debatable wether 'PC class' software in a mobile phone is a good idea also rather than an OS and software designed for mobile limitations in the first place. Apple have gradually opened up iOS to be more 'PC class' but it's still far from feature rich. What it does do, it does well. What it doesn't do, it doesn't do and that's quite a lot of things some people consider 'PC class'.

      • Sander van der Wal

        PC browsers are still better than smartphone browsers. Can't even set iphone up to not track history.

        Palm OS was the last mobile baby OS, and only because it could not allocate big chuncks of memory. iphone uses Objective C, not plain old C, and that makes all the difference on the world.
        Running native C apps on iphone? You are not allowed to buy interpreters like Python on it. Where's R? Where's SPSS? in 2007 there was no sign of the app phenomenon, and that is what is why iphone is now starting to influence PC UI's.

        The Psion organizer was the first PDA, which makes it the ancestor of all smartphones.

      • davel

        In what way was iOS better than a PC?

        I am talking about OS here. not the finger flicking UI.

    • Stevie J

      You're right, not invented. Reinvented.

    • asymco

      I've been using smartphones since 1999 though even then I was not among the first.

      • HTG

        I had a Palm Tero before switching to iPhone in 2008… and all the Tero did was suck… it was, as it were, a dumb smartphone because it was so awful at everything it did when compared to the iPhone…

      • Ravi

        I *loved* my Treo 650. In its time and place, it was wonderful. After all, before my Treo I didn't have access to the Internet *everywhere* and the transition from nothing to something was mind-boggling.

        You certainly had to get used to its quirks (e.g. which sites did and didn't work well in Blazer), but even Blazer was an order-of-magnitude better than a WAP browser (even if the result of rendering was pretty stripped-down). Not to mention the joys of Bluetooth DUN (tethering for the newcomers).

        And then one fine day Google got into the act, making a mobile site for gmail (good enough for checking mail, though usually not for composing it) and eventually automatic mobile formatting for the results of Google searches. I'm not going to pretend my old Treo is remotely comparable to what you can get today, but in 2005 it was the phone I'd been waiting for since 2002 and, in my opinion, the best you could get. That's the sentimental reason I was sad to see Palm's slide and I'd like to see WebOS go somewhere.

      • airmanchairman

        My first smartphone was the SonyEricsson P800.

        I'd been carefully watching the evolution of the market since 1999, and a few years later, that blue marvel was the first one to "blow my skirt up" a la Marilyn Monroe :-)

  • TomB

    Great post.

    HTC acquired One & Co in Dec 08', for me this has given them a huge boost. HTC's hardware is more uniformed, recognised and beautifully designed.

    Just a small edit, there is no such thing as "negative growth". It's an oxymoron.

    • Hamranhansenhansen

      Negative growth is the opposite of positive growth.

      • berult

        Negative's growth is the opposite of negative's recess. They both are complementary to positive's growth, positive's recess, and a given initial position. A sober point of view from grammar school tells me that a pleonasm suffers from being equated with a contradiction, unless of course doubling down on an affirmation makes the rhetorical case of picking up on a contradiction.

    • chandra

      I agree. I think the word is decay, decline, contraction or reduction.
      Negative growth is widely used however, but clumsy imo as there's an implied contradiction.
      Positive decline anyone?

    • unhinged

      One of my lecturers at University held the same opinion and would always ask each year's class for an example of "negative growth." Apparently one year, some wag said to the balding lecturer "Yeah, mate, just look at the top of your head."

  • Sander van der Wal

    I do not believe that HTC will manage to get it's own OS accepted by developers, if it chooses to follow that road.

    There are already lots of competing OS'es that are struggling, like Bada.

    It might get traction if it used a cross platform strategy, like using Mono for .Net compatibility, or even Qt.

    • http://twitter.com/davidchu @davidchu

      Everyone wants their own platform because everyone knows that that's the path to higher margins.

      But for a company in HTC's position, you can't lead with a platform. You have to lead with a product first. Take a look at the iPhone, Kindle or even Google Search. They started out with a stand alone product that was attracted an audience before they opened it up.

      • Sander van der Wal

        iPhone 1.0 was open from the start, because you could develop web apps. The web is a platform too. But web apps didn't take off on iPhone. Not on the competition either.

        That doesn't make HTC's problem any easier to solve. They need a platform for their smartphone business, but they will not be able to pull that off, afaics. Creating a new product that needs a platform is an even harder problem to solve.

  • r.d

    so why did Samsung report a loss after all they have nexus S.
    according to google number Android 2.3.x is 2.5% which equates to 1.25 million
    phones since dec that accessed the android market which probably includes upgrades as well.
    while honeycomb is just 0.2%.
    Also 2.2 went from 50% to 68% since dec.

    • Iosweeky

      Because phone sales are just one tiny part of the samsung empire.

      • CndnRschr

        Yup, hard to see Sammy losing money on the Galaxy S. The Galaxy Tab not so much but those are sunken introductory costs to be able to compete in the tablet sphere (although the new tablets from Samsung don't look particularly compelling). Samsung makes a lot of money selling NAND memory (especially to Apple) and has a lot invested in flat screens but TV prices are commoditized.

  • Bruce

    Interesting chart on HTC Growth. The introduction of the Motorola Droid/Milestone may have something to do with HTC underperforming the market in late 2009 and early 2010. Another phone introduced in that time frame is the Nexus One, which did not sell as well as HTC and Google hoped it would.

    "HTC was a Microsoft dependent and now they’re a Google dependent."

    One thing that did not change is that HTC is dependent on their buyers, the carriers. That is who HTC makes phone for, not for you and me.

    "If HTC wants to control its destiny it needs to control its suppliers."

    Even with their own OS HTC could still end up being a running dog for the carriers. HTC and Google tried to circumvent the carriers and sell directly to end users with the Nexus One. It didn't work, but I give them credit for trying.

    The iPhone is an amazing, ground breaking product. Part of what makes it amazing and ground breaking is the OS. I think another very important part is Apple's unique relationship with the carriers.

  • iphoned

    I thought Android was supposed to be a race to the bottom?

    • CndnRschr

      It will be – based on the low-no cost licensing but right now there's a spec war at the high end. HTC will try to maintain their high spec phones for high margins and profile, but there are and will be cheap HTCs to compete with ZTE and the low end. You can get iPhone 3GS 8Gb for $0 on contract. There's the rub though. Right now, there are few data plans that, over their term, cost less than the most expensive phone (actual, not subsidized cost). Until that changes, the cost of a phone is not so significant. Low end smartphones will not take off until there are low end data plans that don't convert the phone essentially into a dumb phone.

  • http://twitter.com/davidchu @davidchu

    HTC is well run and I don't think their execs are sitting in an ivory tower.

    My buddy goes to a business school in Taoyuan, where HTC is located, and told me that an HTC exec gave a guest lecture about the difference between being first to market and real innovation. I don't think they are blind to the disadvantages of not owning their own OS and they have made remarks in the past that show that they are interested in pursuing that path. We will see how they adjust to a changing market.

  • berult

    HTC is patent infringement proxy 'par excellence' to Google. In a desperation move turned into some sort of business partnership arrangement, they paid 'protection dough', sold the solid part of their soul to Microsoft, Google's nemesis and 'prima donna' patent troll.

    When you're down to laying your future at Google's feet and your past on Microsoft's lap, you've got to up the ante and throw boatloads of units at the groundswell of laughs.

    • iphoned

      Speaking of patents, didn't Apple file an infringement suit against them last year for using Touch among other thing? Did nothing come of it? Strange we have not heard more.

  • Kwyjibo

    HTC Sense is their software, it’ll play an increasingly important part in everything they do, especially as RIM are going to show you needn’t be Android to run Android apps.

    HTC’s advertising in the UK is heavy on Sense, and barely mentions Android.

    I think they’ll stick with Google though, given their ascendancy – but they’re smart enough for a plan b.

  • OpenMind

    HTC is a nimble and flexible. It does not have an emotional affection for specific platform. That is how the business should be. It is also lean and therefore profitable. It is a good business case to study. Wonder how long the good execution can carry you without a vision?

    • TwangisKahn

      Just look at Dell. A shadow of it's former self, but still good business.

      Not all companies are blessed with vision, in fact most are not. There will always be parasitic businesses that feed profits back to the mothership.

    • Eric Gen

      Ask Dell! They should be able to give you some idea of an answer.

      • OpenMind

        So HTC = Dell. As the owner you ride as long as possible, just like Michael Dell. As investors (shareholders), do you still want to be in Dell now? What clues to watch for investors to get out HTC?

    • asymco

      It's not that HTC has no vision. It's a question of whether it has the ability to improve what is not good enough in the eyes of the consumer. Their vision may be that hardware integration is what is not good enough and that mobile software is good enough. If so then they are executing on that vision.

  • Ben

    Before you get too caught up in Horace's doom and gloom predictions, you might want to revisit his doom and gloom predictions for HTC from last year:
    http://www.asymco.com/2010/02/01/htc-hard-to-comp

    Horace's recommendation at that time? HTC needs to follow Nokia and RIM's model to succeed. Seems like he's suggesting the same thing now, except of course in the meantime Nokia has gone the other way and copied HTC's business model.

    As for the graph showing HTC growth, doesn't that reflect the unit share growth of basically all Android OEMs? You could say the blue line for market growth was iPhone growth, and the green for HTC was Android as a whole and I doubt it would look substantially different from the real figures. Why are we supposed to believe that HTC is some kind of anomaly? You could graph them alll individually in case anyone thought the unit share growth of HTC, Motorola or Samsung were non-representative of Android OEMs.

    • asymco

      The blue line is not equivalent to iPhone growth. iPhone was substantially higher than market growth through the period. I'm not suggesting HTC is an anomaly only that HTC was not growing while it transitioned from Windows Mobile to Android + Windows Phone. The point of the article is to demonstrate dependency not to pass judgement on Android.

      But dependency is not just a matter of margins. It's also a matter of being able to capture the value at the point of where the product is not good enough. Anyone advocating Android implicitly also advocates software as the key value proposition in devices–something with which I agree. An OEM would be wise to note that for themselves.

      • http://www.noisetech-software.com/Home.html Steven Noyes

        Horace,

        While I agree that Software is a huge value position it is easy to see Android is NOT going away any time soon. As such, there is good business in making Android handsets. When you look at Samsung and their successful Galaxy S line, they were able to pull that out by owning lots of the hardware stack instead of the software stack. The Hummingbird to the Super AMOLED screens were unique to the Samsung line.

        So why could not HTC add value by doing their own ARM design? If you want to differentiate yourself in a sea of me-to products, one way is to have hardware no one else has. HTC obviously has knowledge of ARM architectures and several different GPU units. When you look at the A5, 95% of the units is almost COTS pieces.

        I just don't see allot of more room for mobile OSes. You have iOS, RIM, Android, Symbian (still), WP7, Meego, Bada… And you still have Facebook that has not shown their hand.

        NVidia came out (IMO) with a disappointing offering in the Tegra 2 GPU wise. HTC will be tied to using that along with everyone else. Sounds painful to me.

      • http://twitter.com/davidchu @davidchu

        http://www.androidtabletworld.com/android-news/go

        I doubt Google will let them do their own ARM designs. There is already processor fragmentation in Android where certain apps won't work with different chips (mostly games). As we already know, games are a big part of the iOS market and I'm sure Google knows that that is one of Android's weaknesses. I'd place a big bet on Google standardizing the processor moving forward.

      • Ravi

        I'd be very surprised if Google mandated processors, rather than minimum instruction-set support. It would smack of micro-managing, and it isn't necessary.

        Just like iPhone, the relevant processor gap for Android is ARMv6 vs ARMv7. I don't see why Google would care where HTC got their processor as long as it solidly supported the instruction set they wanted to standardize (ARMv7, presumably).

      • nns

        While I see where you're coming from, I think it's important to remember that most reviews of Android devices (at least the ones that I've read) end by saying that, while the hardware is nice, and Android is pretty good, it just doesn't quite have iPhone-like "polish". I think there's a huge hole in the market, and if someone can make a substantially better, more user-friendly open source OS, it could gain a lot of traction with these dependent companies, like Samsung and HTC.

      • handleym

        "If you want to differentiate yourself in a sea of me-to products, one way is to have hardware no one else has."

        This only makes sense if
        - the hardware is reasonably priced AND
        - it offers functionality people want.

        You could add a QCL to a phone for $20,000+ and have a phone that you point at some matter, press a button, and the phone tells you what chemicals the matter is made of. That would be pretty cool — and good luck selling your $22,000 phones to the world.

        You could add a crappy x86 chip to your phone and have the ability to run DOS apps. That would be cheap — and would provide a capability that damn few people care about.

        Simply saying "make your own CPU" relies on the assumption that
        - making the CPU will be cheapish AND
        - that there are tricks available to make a CPU that is substantially more desirable (much lower power, or much faster at current power levels) that ARM and it's current crowd of licensees (and, for that matter Intel) are unaware of.
        This seems a highly dubious proposition.

        And what alternative hardware do you suggest? Better GPU (than what Apple currently has)? Better screen (than what Apple currently has)? Better flash (than what Apple currently has)?

        The ONE (and ONLY) way I see a phone TODAY able to separate itself from everyone else in hardware is to provide antenna diversity in a GSM phone, or antenna diversity for wifi.
        The fact that no-one does this yet I find extremely puzzling. It may suggest that these vendors are idiots (always a plausible hypothesis) or it may suggest that while, in theory, this would be a power win, in practice the chip vendors have not yet figured out all the practical pieces necessary to actually have that power win theory translate into practice.

      • http://twitter.com/aegisdesign @aegisdesign

        It's not that puzzling. Multiple antennae in todays slim and thin smartphones is going to introduce bulk and sap power.

        Also, I'd imagine there's a large wad of patents belonging to Nokia that stop most companies (not Apple obviously) ;-)

      • handleym

        You are aware, are you not, that VZW DEMANDS that all its phones incorporate antenna diversity — and that the iPhone 4 CDMA edition appears to comply with this just fine, just like all the VZW Android phones?

        There was a reason I said GSM in my post above.

      • Ben

        Yes, iPhone was above market growth, but Motorola, Samsung and HTC at least have been higher again, keeping roughly the same relative relationship in the graph e.g. in Q4 last year Market growth was 74%, Apple growth was slghtly above at 86%, but Motorola, HTC and Samsung were higher still at 96%, 142% and 500% (that last number is your own estimate). The overall trajectories are similar enough to make the comparison without getting hung up on the absolute figures.

        The elephant in the room is that the easiest route to having your own OS is to adopt Android, ride its expanding popularity and then fork whenever convenient, whether it's forced on you by Google turning evil, or just because you think it would be advantageous. On the other hand, I guess this is one of the things Google's anti-fragmentation contracts cover. From HTC's perspective they'd like to be able to fork whenever suits them, but on the other hand they don't want Samsung to fork because that would hurt them, so probably it's best for them all to agree not to.

        You'd really need to know what those contracts say in order to decide what's best for HTC, (I'm guessing they can still fork Android as long as they don't call it Android) but whatever the future is, it's going to look pretty much like Android (ARM, Linux, Webkit, building on lots of open source if you want to hope to compete) so they're gaining valuable experience regardless.

        But if the only result of independance is to be able to milk the consumer when "the product is not good enough" then I hope they stick with Android and actually compete for my business.

      • Insomniac

        Ben, the result of independence is the freedom to innovate, not to milk the consumer. In fact, if those guys make good profits with off-the-shelf software, they are the ones milking you.

  • lrd

    Don't count you chickens before they hatch- lots of lawsuits out there could bring HTC back down to nothing.

    HTC brings nothing to the table other than copying others hard work and mis advertising and then having the audacity of pawning it off as their own.

    • http://www.noisetech-software.com/Perspectives.html Steven Noyes

      For example?

      Personally, I see HTC doing lots of original work as a component manufacture. They are well run and understand their cost structures very well.

      • http://twitter.com/aegisdesign @aegisdesign

        Original work such as?

        I can't think of anything in an HTC that is particularly cutting edge or innovative. They've always been followers, not leaders.

  • http://Notesark.com Iphoned

    So what happened to the Apple's touch lawsuit agains them? it has been a while..

    • addicted

      Most likely their deal with MS saved them.

  • http://Notesark.com Iphoned

    I don't know they copy or not. But I do know they are from Taiwan.

  • http://twitter.com/peter_burke_ceo @peter_burke_ceo

    htc stock has tripled since betting on Android and now have a premium valuation, a currency to expand it's operations and influence. Fantastic value creation by HTC management at the same time confounding analysts who predicted a "race to the bottom". If anything HTC bet on Android has sent it's shares racing to the "top".

  • chandra2

    There is something that bothers me about many of these analyses and opinions. For the most part, it is post-fact judgement. There are two major categories of traps to watch out for: 1) Be aware of the survivor bias in all our thinking. 2) Sufficient conditions. Necessary conditions alone are not sufficient.

    There are a lot of vision based initiatives, that looked perfectly fine at that time, failed. If you only study the success cases, that can lead you to a blind spot. Asking HTC to evolve their own software platform is one thing, but saying that is the only way to survive in the future is overestimating your understanding of all the complex things that goes on that makes a product succeed in the market place. Necessary conditions for a good vision is what is discussed in this thread, but finding the sufficient conditions for success of that vision is a much harder thing. That is not strictly data based.

  • asymco

    The point of the post is to think about the long term (both past and future). The greatest growth for HTC was during the Windows Mobile era. That era came to an abrupt end through no fault of HTC. It would behoove management there (and CEOs everywhere) to consider the causality.