Yesterday we heard that HTC and Apple have reached a licensing agreement, where HTC will pay Apple royalties relating to Apple patents for each Android device they sell.
Now according to a recent report, HTC could be paying Apple up to $8 for each Android smartphone they sell, and this could mean that HTC will end up paying Apple between $180 million and $280 million in 2013 based on sales of between 30 and 35 million smartphones sold.
HTC is already paying Microsoft a licensing fee on Android devices, which is rumored to be around $5 per handset, that means that HTC has to pay out fees of around $13 for each Android device it sells.
Impact on HTC’s Pricing Strategy
This could possibly drive the price up of HTC’s devices, as the company will need to cover the additional costs incurred from these licensing fees. For instance, if HTC decides to pass these costs onto consumers, we might see an increase in the retail price of their smartphones. This could potentially affect HTC’s competitiveness in the market, especially against other Android manufacturers who might not be subject to similar fees.
Moreover, the cumulative effect of paying both Apple and Microsoft could strain HTC’s profit margins. Given the competitive nature of the smartphone market, HTC will need to carefully strategize how to balance these additional costs without alienating their customer base. They might explore cost-cutting measures in other areas of production or increase their focus on premium devices where higher prices are more acceptable to consumers.
Potential Ripple Effects in the Industry
We wonder which other Android manufacturers will be next to come to an agreement with Apple on licensing their patents. Companies like Samsung, LG, and Huawei could potentially face similar pressures. If Apple pursues licensing deals with other manufacturers, it could lead to a broader shift in the industry where licensing fees become a standard cost of doing business for Android device makers.
For example, Samsung, which is one of the largest Android smartphone manufacturers, could be significantly impacted if they were required to pay similar fees. This could lead to a ripple effect where the cost of Android devices across the board might increase, potentially making them less attractive compared to Apple’s iPhones, which do not incur these additional costs.
Additionally, smaller manufacturers might struggle more with these fees, potentially leading to a consolidation in the market where only the largest players can afford to pay the licensing fees and still remain profitable. This could reduce the diversity of options available to consumers and stifle innovation as fewer companies compete in the space.
Source Wired
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