HTC One / Butterfly SmartPhones to Put HTC Back in Big League

HTC One Mobile PhoneThe high-end SmartPhone market growth is decelerating, iPhone’s decline on a large base leaves significant opportunity for other brands, if one proves able to come up with a truly innovative model. HTC suffered a vicious cycle in the last 18 months with a series of mistakes but we now expect a virtuous cycle to start after strong feedback of HTC One and HTC Butterfly.

“One” and the “Butterfly” have successfully made the much awaited impact in the smartphone market and are poised for a strong HTC recovery. HTC “One” has out-innovated other smartphone rivals in the high-end smartphone market, in our view.

HTC “One” was seeing very strong initial responses and we view it as a ‘killer’ product which will stand out amongst its rivals, especially Samsung Galaxy S4. Recent expert reviews and online polls rate HTC One better compared to Samsung Galaxy S4.

HTC has been struggling with mass volume production of the new One, delaying the launch by a few weeks. The key bottleneck has been the OIS (Optical Image Stabilizer), which is part of the VCM that is used to stabilize the lens. The VCM supplier is Sharp, and APP (a small HK company) is supplying into Sharp. Another hurdle HTC has to overcome is to replace Microphone chips with HDR Functionality for all handsets that ship from June-2013.

HTC Butterfly has shown healthy sales and significant demand most especially in Taiwan and Japan. After the success of “Butterfly” in Japan and Taiwan, and the strong consumer feedback of HTC One, expect Butterfly 2 (expected to be launched in Sep) to be rolled out by over 100 global carriers and it will come with the innovations present in “One”, such as Ultrapixel camera with optical image stabilizer, Boom Sound, etc, plus a refreshed industrial design.

Going forward, HTC will likely use 3 product brands, One for premium segment (compete with Galaxy-S/ Note/ iPhone), Butterfly for fashion series (compete with Sony Xperia, LG Optimus, low-cost iPhone) and Desire for low-to-mid price points.

Finally, HTC has started to hire pop stars and sponsor major sports events like UEFA. This has yielded them some success in Japan back in J Butterfly model. It now also replicates this approach in some other markets such as China, India and Taiwan.

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