Why HTC's Top-Ranked Virtual Reality Gear Will Lose Market Share In 2017

Virtual reality gear was supposed to revitalize HTC after a decline in its staple business, smartphones. The Taiwanese high-tech developer’s VIVE-branded hand and headgear led the new, fast-growing virtual reality hardware market in much of 2016, giving gamers just about anywhere the controls to shoot at people or dive to the bottom of an ocean as if it were all really happening.

But Sony’s rival virtual reality gear and Oculus Rift sets are expected to surpass VIVE in 2017. HTC is having trouble getting AMOLED headset display panels as competition grows, industry analysts say. Even more glaringly real, newer brands would cut into VIVE’s lead anyway.

HTC’s headgear took a market lead of about 61.4% from April through November this year, according to this Steam hardware survey. But the survey shows Oculus headgear edging

HTC would have particular trouble sourcing the panels because only Samsung’s display panel business supplies them and it will “prioritize customers based on its relations with them in order to maximize its profit,” says Jason Tsai, wearable device analyst at market research firm TrendForce in Taipei. Oculus, which sometimes partners with Samsung on virtual reality gear, would get highest priority for orders, according to Tsai’s priority forecasts. Sony will offer AMOLED's supplier a more stable stream of orders, he adds, and it sometimes works with Samsung. He expects a shortage of panels.
“The AMOLED panel shortage will make it so HTC can't raise its shipments,” Tsai says. “The market share will decrease not because the demand issue, but because of supply problems.”

Apple’s expected orders for flexible, curved AMOLED iPhone displays could also eat into orders, says David MacQueen, apps and media executive director with market research firm Strategy Analytics. HTC’s “tens of thousands” of headgear units would not compare to the volume of a smartphone launch, he says.
HTC will ship 600,000 units in 2017, lapped by Sony in first place at 2.5 million, Oculus at 1.2 million and “other” brands with 800,000, TrendForce forecasts. Less than year ago, analysts said at the time, the company around for nearly two decades was eyeing virtual reality gaming tools as a new growth area after its smartphone segment had shrunk in world market share from 10.7% in 2011 to well below half that today.
VIVE’s other, and perhaps more long-term problem: It will gradually lose market share to newer entrants, such as Microsoft’s devices to be developed with major PC makers. MacQueen anticipates “many new VR headset launches” in 2017 as well as a new line by Oculus.

To compete, HTC may have to lower its price. “If HTC wishes to expand its shipment volume, it would have to launch more price-friendly VR head-mounted displays in the future,” says Steven Hsu, industry analyst with the Market Intelligence & Consulting Institute in Taipei. “Whether HTC will launch a new head-mounted display with a cheaper price will play as a key growth factor for the company.”

http://www.forbes.com/sites/ralphjennings/2016/12/26/why-htcs-top-ranked-virtual-reality-gear-will-lose-market-share-in-2017/#70951eac4eb3