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Commentary: Could HTC build a VR ecosystem in China?

HTC has exerted efforts to help China build up its VR industry in order to establish an ecosystem that will enable it to maintain its leading market position in the VR segment, but it remains to be seen whether HTC's efforts will bear fruit.

The company recently signed a strategic cooperation pact with the city government of Shenzhen, southern China to set up a VR research institute, as well as a CNY10 billion (US$1.47 billion) fund to foster the development of the VR industry in the metropolitan area.

HTC also initiated the establishment of the VR Venture Capital Alliance in June 2016 with 28 initial members, notably including China-based venture capital firms. An additional eight members have since joined the alliance, boosting the venture's funds to US$12 billion.

Announced in China in July 2016, HTC is also implementing the Vive X VR Accelerator program with an initial supporting fund of US$100 million. Under the program, it has chosen 33 start-ups to develop marketable VR products or content with support from HTC-backed incubation centers in Taipei, Beijing, Shenzhen and San Francisco.

HTC has also signed a strategic cooperation agreement with Alibaba Cloud (Aliyun), a cloud service provider under the Alibaba Group, to jointly develop VR technology and related solutions utilizing cloud technology.

With its smartphone business continuing the stagnate and losses mounting up, HTC has been forced to seek alternatives for survival. HTC is eager to build up an ecosystem to spearhead in the VR industry by pouring so much of capital and resources into China.

Judging from HTC's recent investments, the company seems to have a focus on the China market, and is counting on local ties in China to sharpen its competitiveness in the ever growing VR industry.

Alvin Wang Graylin, China regional president of HTC Vive, justified HTC's moves saying that given that China is already been the world's largest market for movies, games and smartphones, the China market is absolutely crucial for HTC to compete in the highly volatile VR market.

The future development of the VR industry in China will have significant implications for the global VR industry over the next five to 10 years, Wang stated.

However, by looking at the way HTC promoted its smartphone business in China, its existing operating conditions, and the competitive environment in the VR industry, it remains to be seen whether HTC can prevail in the global VR race.

Despite the fact that HTC was a pioneer in the development and production of smartphones and was able to compete with Apple and Samsung Electronics on an equal footing, it has never been a real winner in China's smartphone market, due to missteps in the deployment of distribution channels, its brand marketing, and pricing strategy.

HTC chairperson Cher Wang once declared HTC was a China-based brand in order to promote its products to local consumers, because the market has a strong affinity for national brands. However, few took that statement seriously as HTC is certainly not a local brand.

Utilizing its current advantage in the production of HMD (head-mounted display) VR hardware and its close ties with VR technology and product developers in China, HTC is trying once again to fulfill its dream of becoming a major player in China.

However, current major brand vendors in China, including Huawei, Lenovo, Xiaomi and Oppo, are actively playing catch-up and will try to fiercely grab market share from HTC later.

Consumers in China may once again reject HTC's devices once the VR market in China becomes more mature, and local brands are able to roll out competitive products.

Additionally, the handset sector is likely to become the largest market for VR products in the future. China-based smartphone vendors, backed by their large user bases, will be able to promote mobile VR platforms and products efficiently, dealing a serious blow to HTC.