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HTC denies reports it's shutting down factories to save money

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HTC Ones (verge stock)
HTC Ones (verge stock)

After being unceremoniously dumped by Beats Audio in September and recording its first quarterly loss this month, HTC is finding itself having to downsize. A Reuters report this morning tells of the closure of "at least one" of HTC's four main handset manufacturing lines, reducing its production capacity by at least a fifth. This is said to be in direct response to the disappointing sales that have plagued HTC since the beginning of 2012, and the company's chief marketing officer, Ben Ho, concedes as much. He tells Reuters that "when you have less demand you work with less facilities to optimize your costs."

"HTC is not shutting down nor does it have plans to sell any of its factory assets."

In comments made to The Verge, HTC refutes reports of any closures, asserting that "HTC is not shutting down nor does it have plans to sell any of its factory assets. HTC has a very strong balance sheet and will provide the latest financials in our upcoming earnings call to investors and the broader community." That earnings call is scheduled for November 5th.

The nuance of disagreement seems to stem from the fact HTC is operating at a significantly reduced rate due to dwindling demand, but isn't yet shuttering or selling off its phone manufacturing facilities. That excess capacity is probably what HTC is seeking to re-deploy with its recently rumored partnership with Amazon for the production of a phone designed by the Kindle maker.

HTC is less forthcoming in addressing additional reports suggesting it's considering outsourcing its smartphone manufacturing to contractors like Foxconn and Wistron. Reuters identifies the advantage of such an arrangement as coming from "contract manufacturers [having] better component supply management and cost control." That's a fairly damning assessment of HTC's own operations, which presently span a number of its own factories across Taiwan and China.

Splitting up the design and manufacturing arms of HTC is also not out of the question, as reported by Reuters and confirmed by Ben Ho. As Asus showed with its successful split with Pegatron some years ago, it can be beneficial to have two separate entities focused on just one part of the electronics business.