HTC denies it’s closing manufacturing lines
HTC reported its first quarterly loss this month and several reports telling that HTC scales down production lines have emerged. Yesterday, Reuters reported HTC is closing at least one of its four major manufacturing lines, reducing its overall capacity by a fifth. Today, a source within HTC has commented to The Verge. He has refuted the report, assuring that HTC doesn’t have any plans for cutting down its production capacity. Moreover, he has said HTC has a strong balance sheet that is going to be published on November 5.
The Taiwanese company is suffering despite the great hopes after HTC One came out. The One series struggled to gain traction in a market where Apple and Samsung dominate. As a result, HTC reported a negative cash flow of $707 million at the end of June. If the dwindling demand continues, HTC is likely to cut a bit of its capacity sooner or later. Or maybe, the company is waiting to use the excess capacity to produce the rumored Amazon’s Kindle smartphones. However, in this business the production lines must be always optimized and in accordance with the demand. When a company faces less demand, it needs to optimize its costs.
Reuters reports that HTC is planning to combine two big lines in one, in Taoyuan. The overall capacity of the new line in Taoyuan will be reduced by 1 million units per month to 2.5 million smartphones in total. Now, the company can produce up to 4.5 million units per month in all its facilities around the globe.
Another possible solution for HTC could be outsourcing. Like other companies, HTC could reach contractors like Foxconn and Wistron. The advantages of such an arrangement are obvious, because these contractors have a better cost control and supply chain. Therefore, HTC could split up the design and the production operations as many other companies did.
