High Tech Computer Corporation

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High Tech Computer Corporation

23 Hsin Hua Road
Taoyuan 330
Taipei,
Taiwan
Telephone: +886 03 375 3252
Fax: +886 03 375 3251
Web site: http://www.htc.com.tw

Public Company
Incorporated: 1997
Employees: 4,664
Sales: TWD 72.45 billion ($2.23 billion) (2005)
Stock Exchanges: Taiwan
Ticker Symbol: 2498
NAIC: 334210 Telephone Apparatus Manufacturing; 334220 Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

High Tech Computer Corporation (HTC) is the hidden force behind most of the world's Windows Mobile-based clamshell "smart-phones" and personal digital assistants (PDAs). The Taiwan-based company operates primarily as an original design manufacturer (ODM) but also as an original equipment manufacturer (OEM) for many of the world's largest telecommunications companies, including Orange, NTT DoCoMo, AT&T Wireless, and T-Mobile, among others. HTC also produces smartphones and PDAs under its own brand, Qtek, to limited markets. In June 2006, however, the company announced its acquisition of Dopod, a major manufacturer and distributor of HTC-based smartphones and PDAs in the Asian region, a move that placed HTC in direct competition with many of its customers.

Founded only in 1997, HTC grew quickly through its close partnership with Microsoft Corporation, helping the software giant impose its operating system on an initially reluctant mobile telecommunications sector. HTC operates manufacturing subsidiaries in mainland China, and sales support subsidiaries in the United States and the United Kingdom, for its North American and European operations, respectively. HTC is led by founder and Chairman Cher Wang, who is also behind chip maker Via Technologies and is the daughter of Y. C. Wang, Taiwan's wealthiest person. Peter Chou serves as the group's president, and H. T. Cho is company CEO. The company is listed on the Taiwan Stock Exchange and produced revenues of TWD 72 billion ($2.23 billion) in 2005.

SMARTPHONE START IN 1997

High Tech Corporation was founded in 1997 to develop a new generation of personal digital assistants and so-called "smartphones," which combined mobile telephone technology with miniaturized computer and other functions. The development of the smartphones became an important step in what many technology market observers viewed as an inevitable drive toward the convergence of various technologies—ranging from telecommunications to music to video and photography to a variety of computer applications—into single, all-encompassing, handheld units. As company founder Cher Wang told China Daily: "We started HTC with the vision of offering end-users an easy to use product. We have never believed consumers want to have to carry separate laptops, mobile phones and digital cameras."

HTC was not Wang's first venture into the technology sector. Wang was the daughter of Y. C. Wang, head of Taiwan's largest corporation, Formosa, and recognized as Taiwan's wealthiest person. The Wang family had entered the technology sector during the late 1970s, through Formosa Plastic's semiconductor division, headed by Winston Wang, and through First International Computer, established by Charlene Wang and her husband in 1979. The fourth of five children born to Y. C. Wang's second marriage, Cher Wang started out by working for older sister Charlene at First International Computer. Wang then joined with husband Wenchi Chen to found chip maker Via Technologies in 1992. After the Wang family acquired struggling computer manufacturer Everex Systems, based in the United States, in 1993, Cher Wang was placed in charge of the company, and led its turnaround by mid-decade. Despite the wealth of her family, however, Wang was determined to build her career on her own. As she told China Daily: "In my career, I have never got a cent from my father."

By the mid-1990s, Wang had become one of the first to recognize the potential for converging technologies. The proliferation of new handheld technologies, especially mobile telephones and PDAs, as well as the rising popularity of portable computers, had given people, especially professionals, a lot to carry. Wang recognized the need for a new generation of handheld device that could combine most, if not all, of the functionality of the various technologies. This led Wang and Wenchi Chen to found a new company, based around a team of engineers from Digital Equipment, a major customer of First International Computer from when Wang worked there. HTC's research and development team gradually increased to a team of more than 1,000 engineers by the mid-2000s.

HTC at first focused on the laptop computer market, specifically on the newly emerging Pocket PC format. This effort brought the company into its first contact with Microsoft, as HTC received its Windows CE OEM certification at the end of 1997. The company set out to develop the first Pocket PC models for the OEM market and by the end of the decade, its models had captured the industry's attention. In 1998, for example, the company was a finalist in Byte Magazine 's Best of CeBIT awards. By the following year, the company had captured the first prize from PC Week Magazine 's Best of Comdex Spring awards. Supporting the group's development through this early phase was its early initial public offering, in 1998. The company also became the first in the industry to produce a Pocket PC with a full-color screen.

Yet the company's first years were difficult ones. Within two years, the company was facing mounting losses, and its products failed to capture consumer attention. As Wang told Business Week: "The market just wasn't ready for a PDA phone that behaved like a minicomputer." At the same time, the company's products were beset with technical problems, both in their design and operating software. In order to survive, Wang was forced to pump millions of her own money into the company, notably in stepping up the group's engineering and design capacity.

COMPANY PERSPECTIVES

Mission Statement: "Our mission is to become the leading supplier of mobile information and communication devices by providing value-added design, world-class manufacturing, and logistic and service capabilities," Peter Chou, President HTC Corporation, said. He continued, "HTC is working hard to establish a high volume manufacturing facility, and it is focusing on wireless capability, strengthening its R & D team, and developing a software team capable of creating world-class consumer and business applications that will enhance the value of our hardware. It is investing in growing engineering capability in GSM, GPRS and CDMA wireless technologies, investing in sophisticated wireless equipment for both manufacturing and engineering, and investing in protocol software and technology licensing.

HTC's breakthrough came in 2000, when it was awarded the contract to develop and manufacture a new breed of still smaller handheld computer, known as the personal digital assistant (PDA), for Compaq Corporation. The Ipaq, as the new device was called, became an instant sensation. The success of the Ipaq was a lasting one, too, as the company continued to develop new models through the middle of the decade. Of importance, the Ipaq featured an expandable design, with slots for both the CompaqFlash Expansion Pack and a PC Card Expansion Pack, pointing the way to the future convergence of the computing and telecommunications markets.

As Peter Chou pointed out in a company press release in 2000: "We are at the beginning of a 2nd wireless revolution; one that will see wireless and Internet integration as the most important technology of this decade."

KEEPING THE LEAD IN THE NEW CENTURY

HTC set out to play the role of leader for the new market. In 2001, the company reached a new agreement with Microsoft to develop a new generation of mobile telephones based on the extension of Microsoft's latest handheld operating system, Windows CE 3.0. By March of that year, the company had debuted its first fully functional prototype of the new "smartphone." The fact that Microsoft CEO Steve Ballmer himself made the demonstration helped dramatically raise HTC's profile among the global telecommunications industry. In support of the new product line, HTC reached a processor supply agreement with Texas Instruments in May 2001.

By 2002, HTC had released its first commercially available smartphone, which was picked up by fast-growing British telecoms group Orange, later part of France Telecom. In that year as well, HTC launched its first wireless Pocket PC. The company quickly signed up new customers, including Germany's T-Mobile, the Philippines Smart Communications, and the United States' AT&T Wireless, which added smartphones in 2003. The successful launch of the new technology also transformed HTC's revenue picture. Whereas the group's Ipaq sales had dominated its turnover, accounting for some 85 percent of total company sales in 2001, HTC had successfully reduced its reliance on that single device, back to just one-third of sales, by 2003.

By 2003, HTC faced a growing number of new entrants in the smartphone market, including competing Windows versions, and the rival operating system, Symbian, used by Nokia and Motorola, among others. In response, HTC moved to lower its cost by shifting parts of its production to mainland China, incorporating a subsidiary in Suzhou in 2003. The company also focused on new product development, driving its smartphones toward still smaller, sleeker designs. The company also counted its focus on the handheld market as part of its strength against the newly emerging competitors, which entered the smartphone market with a background in personal computers (PCs). A far different sector, the PC market demanded high volumes, with little need for product innovation. The smartphone market, on the other hand, was especially driven by research and development capable of extending functionality.

HTC's sales rose quickly, as more and more of the world's major telecommunications providers adopted the company's smartphones. By the end of 2004, HTC's revenues had neared $1 billion. In that year, the company boosted its software development wing with the acquisition of IA Style, a noted developer of software applications for the Windows Mobile operating system. Following the acquisition, IA Style, which had previously operated in the retail sector, shifted its operations entirely to supporting HTC's own product development. In the meantime, HTC had begun expanding its global operations, launching a subsidiary in the United States in 2003, and a subsidiary in the United Kingdom in 2005. In this way, the company positioned itself closer to its major customers, which included European giants such as O2, Orange, Vodaphone, T-Mobile, and Telefonica. Also in 2005, HTC became the first to release a smart-phone based on the new Windows Mobile 5.0 operating system. By the end of that year, the company's sales had doubled, topping $2.2 billion.

KEY DATES

1997:: The company is founded.
2000:: HTC is awarded the contract to develop and manufacture a PDA, the Ipaq, for Compaq Corporation.
2001:: HTC reaches an agreement with Microsoft Corporation to develop a new generation of mobile telephones.
2002:: HTC releases its first commercially available smartphone and its first wireless Pocket PC.
2004:: HTC's revenues near $1 billion; IA Style is acquired.
2005:: HTC becomes the first to release a smartphone based on the new Windows Mobile 5.0 operating system; company sales top $2.2 billion.
2006:: HTC agrees to acquire Dopod.

In 2006, HTC moved to boost its operations in the Asian markets as well, announcing its agreement to acquire Dopod in June of that year. Dopod was then a major player in the Asian regions with sales of its own HTC-based smart-phones. The acquisition raised eyebrows, particularly among HTC's customers, as the addition of Dopod operations placed HTC in direct competition with the company's own customers. The move signaled the company's possible interest in moving out of the shadows in order to achieve recognition as the world leader in smartphone technology.

PRINCIPAL SUBSIDIARIES

Exedea Inc.; H.T.C. (B.V.I.) Corporation; High Tech Computer Corporation (Suzhou) (China); HTC EUROPE Co., Ltd. (U.K.); HTC USA Inc.; HTEK.

PRINCIPAL COMPETITORS

Siemens AG; Sony Corporation; Thomson Multimedia Inc.; Fujitsu Ltd.; AT&T Inc.; Nokia Corporation; Motorola Inc.; Mitsubishi Electric Corporation; Cisco Systems Inc.; BellSouth Corporation; Louis Dreyfus S.A.S.; Tyco Electronics Corporation.