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HTC CEO Peter Chou

Taking On the Toughest Job

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From smartphones to PDA phones with Windows CE, to cell phones with the new Android platform, HTC has always been first. The secret is taking the path of greatest resistance.

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Taking On the Toughest Job

By Ching-hsuan Huang
From CommonWealth Magazine (vol. 388 )

By virtue of innovation, HTC has always grabbed the international headlines. The world's largest supplier of Windows-operated handsets, it is also Taiwan's highest priced stock. BusinessWeek has called High Tech Computer Corp. (HTC) 'the hottest high-tech outfit you never heard of.' The U.S. magazine has ranked HTC repeatedly among the world's top 100 information technology companies and has given the company high rankings in its Top 50 of best performing Asian companies.

With a 37-percent profit margin and earnings per share (EPS) of NT$50, HTC towers above the rest of Taiwan's high tech sector. In the fourth quarter of 2007 (for which final statistics have not yet been tabulated), HTC raked in an average NT$100 million per day.

Founded ten years ago, HTC began as a contract manufacturer of Compaq PDAs. Since then the company has launched its own name brand, HTC, with respectable results. In the first three quarters of 2007 HTC posted revenues of NT$79.5 billion and profits of NT$18.9 billion. In contrast, Taiwan's five largest contract manufacturers boast revenues five times higher on the average, but average profits no higher than HTC's. HTC is expected to post a NT$50 EPS in 2007, making it Taiwan's most profitable enterprise.

Nevertheless, HTC's magnificent rise began on the European continent.

Telecom Operators Kowtow to HTC

It was probably the first time in history that a multinational European telecom operator felt compelled to bow to a Taiwanese ODM company.

In 1999, HTC CEO Peter Chou had a casual chat with executives of British telecom giant mmO2 (later renamed O2), not meaning to discuss concrete business. Back then telecommunication technology was just about to migrate from pure voice-traffic second generation (2G) networks to 2.5G networks that were also able to transmit mobile data. The British telecom firm had already heavily invested in new networks, but faced the conundrum of lacking handsets offering the functions that the new networks made possible, such as General Packet Radio Service (GPRS) and blue tooth technology. At the time, Chou had brought nothing but the concepts in his head. He told his counterparts that HTC might be able to make GPRS handsets that would connect mobile telephone systems with internet data transfer, although the company hadn't even yet conceived such a product. Half joking, Chou's counterpart fell on his knees, begging him to make them quickly.

'I signed our first contract based on a concept,' Chou recalls with a barely concealed grin on his face. While the large telecom carriers used to be treated like majesty by the brand handset makers, Chou made them kowtow and beg for cooperation.

In the end it took HTC three and a half years to deliver the promised product, about one and a half years later than originally pledged. But HTC, which had invested tens of millions of U.S. dollars in the development of this product, still came out as the global leader, releasing the first PDA phone with computer powers. The device ran on a Windows operating system and combined Internet access with audio and video streaming. Instantly, it turned simple mobile phones into versatile entertainment gadgets.

HTC has never been content to be relegated to second place. It was the first to put out a PDA phone running on a Windows CE operating system, the first to produce a smartphone, the first to cooperate with Google, and it will be the first to introduce a mobile phone that runs on the new Android platform in 2008. Chou's brain has 'innovation' written all over it.

A Natural Rebel

When Chou founded his company, his strategy and firm belief were that innovation is a must.

In 1997 Chou, H. T. Cho and several other fellow engineers left computer maker Digital Equipment Corporation to found their own company. They believed that the computer industry's prospects for innovation were gloomy given the stranglehold that operating system maker Microsoft and CPU maker Intel had over the industry.

'So we hammered out a direction at the time ?V to not touch anything related to personal computers,' Chou explains. 'I wanted to find something that wouldn't allow Taiwanese manufacturers to emulate us in droves, thus destroying prices.'

However, that was easier said than done. Taking the road of product innovation or name brand creation is an arduous task.

'I most admire him for going for the most difficult, really difficult job each time. We often doubt whether we will be able to deliver,' admits a middle-rank supervisor who has worked with Chou for many years.

At HTC it is the rule for the development of a new handset to take one or two years. Quite a number of HTC products take more than three years to complete, with a constant turnover of product managers.

For someone who is not an HTC employee, it is difficult to imagine how persistent and obsessed with detail Chou is.

Chou does not trust the beautiful presentations on paper that his industrial designers submit with each new project. He will definitely insist that they create a real model and hook it up to the system so that it can function. Then he will take it into his hand and play around with it to get a feel whether the new product is sellable.

Therefore, it is not out of the ordinary at HTC that projects are put on hold just before mass production begins.

'I learned from him that if you don't do a good job, don't even think about convincing him,' an HTC employee reveals.

Own-brand Strategy Meets Heavy Doubts

In 2006 HTC's turnover topped the NT$100 billion mark and its EPS reached NT$57. It was HTC's most successful year to date, thanks to sales of almost 10 million smartphones. But when Chou announced that HTC would launch its own brand, the company's share price temporarily plummeted, falling from a high of NT$1,000 to less than NT$500.

The main reason for the sharp share price drop was that major HTC customers such as Hewlett Packard (HP) and Palm pulled their orders, since the contract manufacturer was about to emerge as a competitor in the name-brand business. Even BusinessWeek voiced doubts about the wisdom of Chou's decision, pointing to BenQ's debacle with own-brand handsets and wondering why HTC should succeed where others failed. Stock analysts also kept downgrading HTC shares.

But for HTC, technology is still the silver bullet.

In the past HTC made all high-end Palm devices. Since Palm switched to another contract manufacturer, it has only been able to release lower-end products, because the new maker lacks experience and technological know-how.

'This shows HTC's strengths and value,' notes Joey Cheng, an executive director at Goldman Sachs (Asia).

Moreover, in June 2007 HTC launched its first own-brand handset HTC Touch, which sold 1 million pieces within just five months. Within two months after hitting the market, the press had written more than 2,400 articles about the new mobile phone. By the end of the year, more than 5,000 articles had been published worldwide, underlining how much attention HTC's name-brand strategy has drawn.

The painful times were soon over as HTC made its comeback as Taiwan's highest priced stock in October 2007. The success of the HTC Touch only encouraged Chou to stick with his name-brand strategy.

Getting a Feel for Individual Tastes and Cultures

With his bright purple necktie and tailored, tightly fitted designer suit Chou has a taste for fashion rarely seen among the CEOs of Taiwan's high-tech enterprises.

In former times Chou would probably wear an inexpensive H&M suit. But now when he discusses handset design with his engineers, he reminds them that a minimalist, well-executed design generates power, like a crisply tailored, streamlined Armani suit.

Chou, an engineer by training, is not only interested in what's going on in the company's R&D laboratory. He spends the whole day delving into technology and even more time appreciating the art and culture of different countries to cultivate his esthetic sense. More importantly, Chou seeks to understand different cultures in order to be able to design products with local customers' preferences in mind.

In order to really understand the industrial culture in Europe that spawned the world's largest second-generation communications system, Global System for Mobile (GSM), Chou has traveled more than 60 times to France alone.

Strong Curiosity and a Proactive Attitude

Interestingly, Chou is not only into the arts. He has always been able to nurture a strong curiosity and proactive attitude toward everything.

Chou has a broad array of hobbies, including art, carpentry, painting, and music. 'I get involved with everything, I like to work myself up into a frenzy of excitement. I need this to keep my passion alive. That's the only way I've been able to keep doing this (innovation) for ten years as if it were just for one day,' says Chou while pointing to his mobile phone.

'Usually if you do something boring for a long time, you won't be able to stir up passion. Passion means to feel very excited deep inside about doing great things such as making a globally top-notch, unique product or one that makes people who use it very happy,' says Chou in explaining what makes him tick. With his unlimited curiosity, eternal enthusiasm and innovative mindset, Chou has built HTC's values and written his own unique, remarkable story.

Translated from the Chinese by Susanne Ganz


Chinese Version: 宏達電執行長周永明》創新教父 只選最難的做

Keywords:

好友人數