Feature Article

August 28, 2013

HTC is Building a Mobile OS for the Chinese Smartphone Market

When in doubt, build your own operating system. That appears to be the approach that HTC is taking. According to a report from The Wall Street Journal, the Taiwanese smartphone maker is developing a mobile software system, which is being specifically designed for Chinese consumers.

The Chinese marketplace is considered to be the largest market for smartphones in the world. Creating a new OS geared for the Chinese market indicates not only a shift focused on the Asian market, but also a move away from the U.S.

Recently, HTC has seen a lot of delays in being able to bring product to market. Most of this has been due to problems with the supply chain. When you couple this with some less-than-successful marketing campaigns, you can see why U.S. sales for HTC have been slipping.

There are several reasons why a new OS from HTC could be appealing to China. The software does involve some deep integration with Chinese apps such as Weibo. This is China’s Twitter-like micro-blogging service.

Image courtesy Shutterstock
Another strong factor is that China feels that Google has too much control over the country’s smartphone industry due to the popularity of the Android OS. A recent report from the Gartner Group shows that 79 percent of the global market share is controlled by Android.

Google’s relationship with Beijing took a turn for the worse in 2010 when Google stopped censoring its search results in China. Google’s search engine was then banned in China. In addition, Google’s app store only has limited offerings.

In a whitepaper that was authored by China’s Ministry of Industry and Information Technology, it states “Our country's mobile operating system research and development is too dependent on Android. While the Android system is open source, the core technology and technology roadmap is strictly controlled by Google."

The whitepaper also goes on to say that Google has discriminated against some Chinese companies developing their own OS by delaying the sharing of codes. This can be seen when Acer, a Taiwanese PC maker, had to abruptly cancel the launch of its smartphone running software made by Alibaba last fall. Alibaba is one of China’s Internet giants.

Along with Baidu, Alibaba was praised by China for creating its own system. There are still some questions surrounding HTC’s Chinese operating system. Will it be a completely proprietary platform or will it be built on top of Android?

It is interesting that in China HTC is still considered to be a newcomer. Although it has been selling smartphones in China for a few years, until 2010 the devices were being sold under the Dopod brand. However, it has been discussing plans to build its own OS for about two years now.

If HTC succeeds, then the new OS could give it a strong foothold in what is considered the most important smartphone market in the world. A recent earnings call by the company revealed that they expect revenues in the third quarter of 2013 to decline by as much as 29.3 percent.

HTC is currently testing the OS. It has already sent several prototypes to Chinese officials. The project is seen as a way to forge political and business ties in China. Since third-party operating systems have little chance of actually competing against the dominance of Android and Apple's iOS, forming a business alliance with China is the way to go.

HTC CEO Peter Chou singled out the China market in an investor call last month as an area of growth. He said "We are very excited about the China market, because not many brands can play in that high-end segment."

It also doesn't hurt HTC that many of its employees speak Chinese.

Edited by Rory J. Thompson

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