There is blood in the water, and the big fish are circling to put the struggling, wounded little fish out of its misery. The little fish, which has some good qualities to offer the world, is having more and more trouble keeping the big fish away. This is happening now to smartphone manufacturer HTC - and the biggest fish of all, Apple, is circling in for the kill.
For three consecutive years, Apple has sued Taiwan-based HTC over patents to block the sales of the manufacturer’s Android devices in the United States. This is despite (or perhaps because of) the fact that HTC has been known to make some of the best Android devices on the market. The first HTC Evo and many of its other earlier handsets were perhaps the biggest and brightest examples of how Android smartphones could challenge Apple’s iPhone across the the U.S. and the world. The Evo was big, it ran “4G” (WiMax), and it had a kickstand. As recently as the third quarter of 2011, HTC's phone shipments were up 93%, with strong growth both in the U.S. and China from smartphones like the Evo, the Rhyme and the Thunderbolt.
This year, Apple has filed injunctions with the U.S. International Trade Commission (ITC) to block, at least temporarily, the sale of the HTC One X on AT&T’s network. The One X was available at AT&T stores for a little more than a week before U.S. customs started blocking shipments of the device based on Apple’s patent claims. HTC has finally busted through Apple’s blockade for now, though, and the One X will go back on sale at AT&T on June 10.
Get It Now, Though, Because...
It may not be available for very long. Apple has once again filed suit with the ITC, looking to block not just the One X and the Evo 4G LTE (coming to Sprint) but basically every smartphone that HTC imports into the U.S. - 29 models in all. This is a continuation of the previous legal battles between the two companies, stemming from a ruling by the ITC in December that HTC infringed on a patent known in its shortened form as ‘647.
Apple is suing everybody in the Android manufacturer ecosystem. This is not news. In fact, HTC was the Android manufacturer that Apple sued in 2010 over patents related to mobile devices, software and design. At the time, HTC had the sexiest Android devices and looked like it could be a giant in the ecosystem. While HTC is still large, it has since been eclipsed by Samsung as the top Android manufacturer, as the South Korean device maker has flooded the world market with a wide variety of Androids. What is different for HTC in its battle against Apple is that it is losing the strength to defend itself.
HTC has revised its revenue projections for the year, based on weak sales and the fact that it has to clear inventory left over from 2011. Part of HTC’s projections, especially when it comes to old products, stem from the fact that the company did not release any decent phones in 2011. In fact, HTC has not had a truly great phone on the market since the original Evo was released - at least not until the One series was announced and released this year.
HTC has become vulnerable in the patent battles that are being waged across the globe. It does not have a position of strength in comparison to the other large Android manufacturers. Motorola holds 17,000 patents and now has the financial and legal backing of Google to help protect it against the likes of Microsoft, Apple and Nokia. Samsung, a company that sells more devices than Apple, has its own cadre of patents, a robust global presence, a mountain of cash and a stout legal team. Samsung has also faced import bans on its smartphones and tablets, but never in a market as important as the U.S. In comparison to Motorola and Samsung, HTC is caught in the wind.
Principles of nature are at play here. Let’s say that the Android manufacturers are a large pack of wolves. Each is proud and independent on its own, but together they pose a formidable challenge. The way to weaken a group is to systematically eliminate its weakest link until the total strength of the pack is diminished, leaving the largest members to fend for themselves outside of the group’s protection. In this case, HTC is the weak member, and its adversaries are looking to isolate and destroy it. There is little in this case that that the pack can do to save its member, even if it wanted to.
HTC is also being attacked from its other flank. Nokia has filed patent suits against HTC (along with Research In Motion and Viewsonic) and has also contacted the U.S. ITC to stop imports of HTC devices. It has also been reported that HTC will be locked out of manufacturing for Windows 8 devices, an action that may have a lot to do with the fact that Nokia is well committed to Microsoft and its Windows Phone platform. There are multiple sharks in the water.
There is no coincidence in the timing of Apple’s attack. HTC may have had a bad 2011, but it took a step back from its approach and completely reimagined its core line of Android devices. The One series and its various iterations are all top-quality devices along a variety of sizes and price points. HTC was about to make a big push in the U.S. and around the world. Yet, just as sales were ramping up, the One X disappeared from AT&T, and consumers were left scratching their heads. The new lawsuits may restore that situation pretty quickly.
In the end, consumers are worse off because of this battle. The best Android device currently on the market has limited or no availability in the U.S., and now, the rest of HTC’s smartphone lineup is in jeopardy as well.