HTC is going to make lower cost Android phones

The title of this post might suggest that this has no place in this site, but I want to make a connection here with something I heard recently on the Vector podcast with Rene Ritchie and Ben Thompson (of Stratachery) and the news that HTC is going to make lower cost Android phones, [via Reuters]. 

The rise (in average selling price of the iPhones) implies that more users are opting for Apple’s flagship iPhone 5S, rather than the cheaper iPhone 5C and iPhone 4S.
— The Verge

Ben Thompson mentioned in the podcast that the Smartphone market in US is maturing by the day and is separating out into a premium end and a lower cost end segment more and more. iPhone clearly is gaining more market share in the premium end market (around 65%) while Samsung is clearly selling more low cost phones than Apple which doesn't play in that segment [via TechPinions]. It also looks like the iPhone users clearly prefer the premium products from Apple (look at the fate of iPhone 5C for example) and how the average selling price of the iPhone actually rose from $577 to $636 in Q1 of 2014. Where as Android users prefer lower cost smartphones or in other words, if someone is in the market for a new smartphone and can/want to spend more than $600 for a smartphone, they clearly will buy an iPhone and not any Android phone.

HTC One (Source - HTC.com)

HTC One (Source - HTC.com)

Apple iPhone 5S (Source - Apple.com)

Apple iPhone 5S (Source - Apple.com)

HTC makes the iPhones of the Android world
— Ben Thompson (on Vector podcast)

When asked about HTC (in the Vector podcast episode 29), Ben Thompson mentioned that HTC makes the iPhones of the Android world, talking about how classy and premium the HTC One was. But though it garnered a lot of positive reviews, it did not sell as well. This again goes to show Android users don't prefer too expensive phones. But more importantly, for HTC to survive they need to make lower cost Android phones and looks like that is exactly what they are planning to do. 

The company that has long prided itself as a purveyor of upscale, feature-loaded products says it needs to sell more mid-tier and affordable smartphones after losing out in 2013. Muscled off-track by fast-growing Chinese rivals like Xiaomi Inc as well as giants like Samsung Electronics Co and Apple Inc, HTC is seeking to reverse a two-year sales slump matched by an 80 percent drop in its share price.
— Reuters

According to the Reuters article, HTC has decided to play in the "mid-tier" (meaning around $150 - $300) market more to compete with Chinese Android smartphone makers and Samsung. Its co-founder though did mention that they won't make very low cost phones and that they will continue to compete (mostly against Apple) in the higher end market as well. So clearly Ben Thompson was spot on this. The smartphone wars, at least in US are taking some interesting turns, with the market clearly bifurcating itself. And with Apple trying to find growth in US, 2014 is indeed going a period of intense competition in the smartphone market!