Taiwan courts tech start-ups to drive economic growth

TAIPEI — Companies such as electric motor scooter firm Gogoro could hold the key to Taiwan’s economic growth.

In just three years, the start-up, which counts Japan’s Panasonic Corp as a strategic partner and Cher Wang, the founder of local smartphone maker HTC Corp as a key investor, raised $150 million to develop the smartphone-synched bike, and a charging network for it. The Smartscooters went on sale last month, starting at around $4,100.

Gogoro’s success in creating a home-grown, innovative product is precisely what Taiwan’s government wants to foster as it seeks to reduce the export-driven economy’s reliance on the island’s world-class tech manufacturing sector.

These tech firms, which include HTC, the world’s biggest contract chip maker Taiwan Semiconductor Manufacturing Co Ltd and iPhone maker Hon Hai Precision Industry Co Ltd, also give Taiwan an advantage over the many other countries seeking to nurture tech start-ups.

“We hope our policies can help a start-up at its most difficult stage – the beginning – so it can go the way of Gogoro,” said Jan Fang-guan, an official with the government planning agency, the National Development Council (NDC).

Tech manufacturing accounts for a third of all Taiwan’s industrial output, but two years ago, the NDC recognized growth in this sector was plateauing as firms lose out to cheaper, Chinese rivals.

In June, exports shrank by the most in more than two years – and for the fifth consecutive month – as shipments of tech goods and demand from major trading partner China fell sharply.

In a bid to stabilize trade and make the economy more “creativity intensive”, the NDC a year ago set up HeadStart, a project dedicated to creating a local Silicon Valley by relaxing regulations for registering start-ups, matching funds invested into projects and creating tech hubs.

HeadStart has attracted some T$13.6 billion ($438 million) in funds so far this year, Jan said.

Cjin Cheng, who manages Taiwan for U.S.-based start-up fund 500 Startups, said the island’s established tech scene and global connections would help entrepreneurs, in contrast to rivals in China, where Internet access is largely restricted.

“You can build out easily if you want to,” she said.

An educated and young population also work in Taiwan’s favor: during a visit in March, Jack Ma, the founder of Chinese e-commerce giant Alibaba Group Holding, said he wanted to set up a T$10 billion fund to support Taiwanese entrepreneurs, rankling the authorities as political ties with China remain uneasy.

Taiwan’s big tech firms make it fertile ground for tech start-ups, said John Fan, who co-founded PicCollage, the most downloaded app from Taiwan.

He said many entrepreneurs create a start-up, work for a big company for a while when their business is acquired, and then leave to set up on their own again. “They are always thinking about the next thing. That’s the default lunchtime conversation,” said Fan, who previously worked at Qualcomm.

HTC, once one of the world’s biggest smartphone makers, also inadvertently gave the local start-up scene a boost: it hired several entrepreneurs during its heyday, but many have since left to set up on their own as HTC lost its competitive edge.

Gogoro’s co-founders Horace Luke and Matt Taylor are former HTC executives. John Wang, who left HTC in 2012 after creating the firm’s “Quietly Brilliant” marketing slogan, has also set up his own firm, which is preparing to launch a smartwatch.

“You’ve got to be able to reinvent the business model,” said Wang.

source: interaksyon.com

HTC fourth-quarter profit below expectations

TAIPEI — Taiwanese smartphone maker HTC reported a worse than expected net fourth-quarter profit on Sunday, despite aggressive cost cutting and a one-time gain.

The company reported net profit of T$0.3 billion ($10 million), compared to a net loss of T$2.97 billion ($99.9 million) in the previous quarter and profit of T$1.01 billion ($34 million) in the same quarter of 2012.

The number highlights how quickly problems have piled up at a company that just over two years ago supplied one in every 10 smartphones sold around the world.

The company, which has lost nearly three-quarter of its market value in the last two years, is now worth about $4 billion, dwarfed by rivals like Apple and Samsung Electronics Co Ltd.

New management installed in the last quarter to tackle that slide must persuade customers the brand can still stand for stylish, feature-loaded phones, while keeping a lid on development costs.

Despite its latest flagship product, the HTC One, garnering rave reviews, the company’s global share of the smartphone market has declined to a mere 2.2 percent in the third quarter of 2013 from a peak of 10.3 percent in the third quarter of 2011, data from research firm Gartner show.

While the company’s recent “Here’s To Change” campaign has seen an advertising revamp featuring “Iron Man” star Robert Downey Jr., analysts remain skeptical about the firm’s ability to differentiate its brand image in a highly-saturated playing field.

The company has embarked on a cost-cutting campaign that includes buying its chips from cheaper vendors and outsourcing production. It also sold its stake in headphone brand Beats Electronics LLC, booking a one-time pre-tax profit of T$2.5 billion ($85 million), which would be recorded in the fourth quarter.

Shuttered factories, a wave of executive departures and top-level reshuffling are symptoms of what industry insiders see as the company’s biggest problem: connecting with consumers.

source: interaksyon.com

HTC turnaround prospects bleak as profit slides

TAIPEI — Taiwan’s HTC Corp said third-quarter revenue could fall as much as 30 percent from the previous three months, far worse than expected and underscoring deepening troubles for a smartphone maker with little prospect of an immediate turnaround.

A delayed launch for its much-hyped flagship phone, the HTC One, has only exacerbated inventory troubles and highlighted its lack of scale when compared to Samsung Electronics Co Ltd and Apple Inc at a time when the market for high-end phones is said to be approaching saturation.

HTC said it expects revenue this quarter of T$50 billion to T$60 billion ($1.7 billion to $2 billion), far below a market consensus of T$75.65 billion and its previous quarterly revenue of T$70.7 billion.

While the company said it expected an improvement in the fourth quarter, analysts were skeptical about a significant near-term reversal of fortunes.

“Negative across the board,” said Daniel Chang, an analyst at Macquarie Securities. “It doesn’t seem like the company has any strategy that can turn this around.”

HTC shares have fallen 44 percent for the year to date and are now trading at lows not seen since 2005.

It is not the only smartphone maker facing an uphill battle as growth for higher-end phones slows, with Nokia Oyj and BlackBerry Ltd also recently reporting weak results.

HTC’s earnings warning is only one disappointment of many over the last several quarters. While the HTC One’s sleek aluminium design has won plaudits, its launch was delayed by several months due to a shortage of camera components and the company has also been hurt by a wave of executive departures.

Its second-quarter net profit came in at just T$1.25 billion, far below forecasts and followed a record low in the first three months of the year. Its worldwide market share has tumbled to 2.5 percent, compared with a peak of 10.3 percent in the third quarter of 2011, according to research firm Gartner.

Alvin Kwock, an analyst at JPMorgan, said HTC’s small size meant it was unable to compete as Samsung cut prices for its Galaxy smartphones in many markets.

“Even a hero product can’t save them,” he said, adding that a partnership with another firm – a possibility CEO Peter Chou has said he would look at – was one of the few strong options open to HTC.

Although HTC is expected to soon launch the HTC One Mini, Samsung and Apple are also likely to announce their own new offerings later this year. A planned marketing blitz, which includes enlisting Robert Downey Jr. for a reported $12 million to star in its ad campaigns, is expected to weigh on profit margins.

source: interaksyon.com

HTC third-quarter net falls 79 percent, lags forecasts

TAIPEI — Taiwan’s HTC Corp, the world’s fifth-largest smartphone maker, said its third-quarter net profit fell 79 percent, missing forecasts, as its flagship phones failed to keep pace with Apple Inc’s iPhone and Samsung Electronics Co Ltd’s Galaxy range.

The former contract maker has been suffering a sharp decline in its fortunes since the second half of 2011 following a fairytale ride when it built a strong global brand with phones based on Google Inc’s Android software.

Unaudited July-September net profit was T$3.9 billion ($133.17 million), the company said on Monday, down from T$18.68 billion in the same period a year earlier and T$7.4 billion in the previous quarter. It did not elaborate. Earnings had been expected to drop to T$5.57 billion, according to a Thomson Reuters I/B/E/S survey of 21 analysts.

Samsung Electronics reported a record quarterly profit of $7.3 billion on Friday, nearly double last year’s figure, thanks to strong sales Galaxy smartphones as well high-end TVs.

“I expect HTC’s margin was down 2 basis points compared to Q2 due to a change of product mix. HTC was cutting prices and its low-end phones were selling better,” said Yuanta Securities analyst Dennis Chan in Taipei.

“The new models we saw in the past few weeks are not going to change the game. It will be able to keep its market share, but we won’t see much pick-up,” he said.

In the past few weeks, HTC has aggressively rolled out new models to regain market share in the fourth quarter. It released the “HTC J” targeted at the Japanese market last month and the “HTC One X+,” an upgraded version of its high-end flagship model last Tuesday, both running on Google’s operating system.

Last month, it also introduced two colorful models running Microsoft’s Windows Phone 8 software, the Windows Phone 8X and the Windows Phone 8S, among the first in the market.

HTC’s third-quarter revenue was T$70.2 billion. The company said in August it expected its third-quarter revenue to be T$70 billion to T$80 billion, compared to T$91 billion in the second quarter.

HTC shares closed down 0.86 percent at T$287 before the earnings were released, while the broader market fell 0.97 percent.

“Before we turn more structurally positive, we would like to see its flagship models contributing a large portion of its business, as its strategy of reducing its number of models leaves it much in need of a hit model for 2013. Until then, we see margins posing a downside risk,” wrote Goldman Sachs analyst Robert Yen in a research report.

source: interaksyon.com