HTC on Tuesday announced the HTC 10, a $699 Android 6 (Marshmallow) smartphone that seems to touch on all the design and feature wishes of any high-end smartphone customer.
However, those plums won't be enough for the HTC 10 to sell well in a crowded Android field, analysts said, even with its 5.2-in. display, fast Snapdragon 820 processor, metal case and superior camera technology. HTC is facing slipping market share and desperately needs to score a success, they said.
"Even with a device like the HTC 10, which has a clean design and … improved internals, HTC simply lacks the scale to effectively compete with Samsung, Huawei, Xiaomi, ZTE, LG and Lenovo," said Jack Narcotta, an analyst at TBR.
"On paper, HTC has the right strategy and the right products," Narcotta added. "The problem is that the premium Android space is toxic to nearly all Android manufacturers. Only the largest are able to endure there, and HTC is simply outgunned."
Narcotta further predicted that unless HTC's recently announced Vive VR headset "vaults into a billion dollar business, HTC is doomed."
Shrinking market share
TBR estimated that HTC's U.S. market share last December was less than 4%, and was even less globally.
Analyst firm IDC said HTC hasn't been among the top five smartphone makers for several years and ranked 15th globally in smartphone shipments in 2015. It was seventh in the U.S.
In terms of sales, Gartner said HTC went from a 2.2% share globally in 2013, down to 1.3% last year.
Searching for what 'juices the game'
"HTC 10 hits all the high points -- design, music, screen and camera -- but you have to come up with something else to juice the game," said IDC analyst Will Stofega.
By comparison, Samsung may have hit on something effective in its marketing of the new Galaxy S7 and S7 Edge smartphones bundled with the Samsung Gear VR.
Soon, Samsung will sell the Gear 360, a spherical VR camera. "Samsung has it right with bundling its newest phones with other products that are not overly expensive," Stofega said.
Likewise, Huawei and its new P9 smartphone with the Leica branded dual-lens camera, announced last week, could be distinctive enough to make some difference in a highly competitive market, he added.
Smartphone companies have always had to find a singular but sometimes elusive quality to market in a new device and then spend marketing dollars to back it up. Innovations, such as flexible and foldable screens and faster 5G wireless, that are clearly different from today's products, will take much longer to arrive, possibly not until 2022.
"Right now, it's a very saturated market and there's no special thing coming up, so manufacturers are resting on their laurels," Stofega added.
Smartphone saturation and longer time to upgrade
While high-end Android smartphones face competitive problems, there is a general recognition -- even with Apple -- that customers in the U.S., as well as other places, are slow to upgrade to new phones.
"Even Apple has to take stock of what's happening in the U.S. and other saturated markets," Stofega said. "You need more than faster speeds and something that's incredibly different, which is not an easy thing to do."
At a recent conference, Stofega said he heard that LTE phones will sell well in Africa in the next year, "but even they don't make up the volumes needed."
Overall, there is smartphone growth, albeit slower than in recent years, so smartphone makers are not about to walk away. But U.S. sales in the last quarter of 2015 were down 6%.
At Mobile World Congress in late February, LG Electronics officials were especially candid about the need to find new strategies to sell smartphones. Two years ago, LG said it knew there would be a plateau in smartphone popularity so it launched the G5 smartphone with a modular design, and heavily marketed the phone in the U.S.
Even Apple is feeling the impact of customers' putting off smartphone upgrades more often than they once did. Brokerage firm BTIG last week cut its estimates for iPhone sales through 2017, based on long upgrade cycles, and indicated that structural changes are underway for the market.
"Upgrade rates [for all smartphones] were lower than we expected in the fourth quarter and driving even lower in the March quarter," wrote BTIG analyst Walter Piecyk.
Marketing matters — a lot
Unlike Samsung and LG, and certainly Apple, HTC is not expected to launch a major marketing campaign with its new HTC 10.
"HTC still has some of the best designs out there today, but they don't have the necessary marketing budget to go out there and push and don't spend — or can't spend," Stofega said. "I've always been a fan of their designs. They have always been spot on."
Carolina Milanesi, an analyst at Creative Strategies, added that the HTC 10 is "good-looking, but it's not the only one that is." She said its primary market will be loyal HTC fans who are upgrading from an HTC M7 or M8.
Before 2012, HTC was considered a smartphone market leader, but "the market grew up so quickly around it that new competitors were able to quickly gain scale," said TBR's Narcotta. "HTC misfired when it mattered most by changing its strategy [to lower-priced devices] when Samsung and Apple were competing in the premium space, only to change it back again when Samsung's smartphone business began to slow down."
Glimmers of hope for HTC
HTC's biggest hope may dwell in markets not directly related to smartphones, like its Vive VR and recently announced partnerships with Under Armour and IBM Watson.
HTC in January announced UA Healthbox with Under Armour, a $400 product with a wristband, scale and heart rate monitor for fitness tracking. (Even though the word "health" appears in the name, it is not sold as a federally regulated healthcare product, and is instead intended as a fitness product.)
IBM Watson will add artificial intelligence to Healthbox features through the UA Record App, which acts as a fitness trainer, coach and consultant. The app will rely on a database kept by Watson of 160 million Under Armour app users, medical research and more.
"Vive VR is relevant to HTC's future because VR is the next step towards how people interface with the world," said Gartner analyst Tuong Nguyen. "IBM Watson makes the fitness app even cooler, and that's an example of where the handset companies need to go with services, where a fitness apps links you to other parts of your life."
Nguyen said Vive and Healthbox will matter more to HTC's future than the HTC 10. "Regardless of the HTC 10 device or its hardware features or the brand and vendor behind it, it will be hard to sell."