Struggling with low profits and revenues globally, HTC is trying to mine gold in the Chinese mainland by reportedly developing a brand new mobile OS, in partnership with the Chinese government. This new mobile OS will feature strong integration with Chinese online services such as Weibo (a Chinese version of Twitter), to counter the popularity of Android and iOS among Chinese customers, mobile OSes that have strong integration with ‘foreign’ services such as Google, Facebook and Twitter, services which have been blocked in China. It’s still not clear if the new OS will just be built on top of Android or if it will be one built from scratch.
The fact that HTC is developing the new OS with the Chinese government makes the entire deal smell a little funny. The Chinese government is infamous for its policies of online censorship including blocking off services like Facebook and Twitter using the appropriately named ‘Great Firewall’. By developing a new mobile OS, it does appear like the Chinese government wants to provide its citizens with an alternative mobile OS which isn’t crippled by the dictatorial censorship practice while also making it conveniently easy to keep a track of the online practices of its citizens. Chinese companies like Alibaba and Baidu have already worked with their government in the past to develop software tailored for Chinese citizens, and now HTC will become the first non-Chinese company to do the same.
While many may be surprised by HTC’s decision to partner with the Chinese government considering the strained relations between Taiwan (the country HTC belongs to) and China, it does appear like one of the few remaining strategic moves for a company ailing from falling revenues and profits. In spite of selling five million units of the HTC One in the first month of launch, and receiving rave reviews (we called it the best smartphone to buy from the current flagships), the Taiwanese phone maker’s flagship device, has failed to rescue the company from the doldrums and help it compete with the likes of Samsung and Apple in Western markets. In July, HTC posted revenues of $525 million, almost 40% lower than the same quarter last year and revealed that it expected an operating margin between zero to negative eight percent for the quarter.
In my opinion, if the news is true, HTC’s deal with the Chinese government reeks of desperation. While many will point to the linguistic and cultural similarities that may help HTC find success quicker in China, the fact that it is cozying up to the Chinese government to develop a software that will undoubtedly widen the state-run censorship machine, instead of simply competing in the market on the basis of its (admittedly high quality) hardware, does not show the company in good light. If HTC is desperate enough in its search for profits to help the Chinese government develop a tool to censor its own citizens, then one must wonder if HTC has any confidence left in its own products.
Sources: Wall Street Journal, Tech Crunch