HTC 2011 Annual Report Download - page 58

6. Effect of changes in the company's corporate
image on the company's crisis management
protocol and mitigating measures
HTC maintains high professional ethics and effective
control over its operations. Corporate honesty and
ethics rules effectively bar all in the HTC organization
from engaging in dishonest or unethical practices.
7. Anticipated benefits / potential risks related
to mergers and acquisitions and mitigating
measures
Mergers and acquisitions in recent years have focused
on raising overall product value and enriching the HTC
user experience. All such activities have been funded
internally. Future mergers and acquisitions will be
conducted after careful consideration of expected
benefits and in accordance with all relevant government
laws and corporate regulations.
8. Anticipated benefits / potential risks of HTC
plant expansion plans and mitigating measures
Apart from regularly enhancing production capacity,
quality and optimizing costs, HTC is working to meet
rising smartphone demand by expanding capacity. HTC's
board of directors approved to build a new office and
production building at the HTC Taoyuan headquarters to
meet future growth, the expended capacity is expected
to support the market demand in 2012.
9. Concentration risks associated with goods
received and sold and mitigating measures
(1) Purchases:
The skills and capabilities of materials / components
suppliers are maturing in step with mobile phone
technologies. Growing opportunities to source materials
from multiple suppliers reduce the risk of overreliance on
one or several suppliers. HTC also purchases in volume
to reduce unit costs and optimize cost structures.
(2) Sales:
HTC products are distributed across the Americas,
Europe and Asia primarily through major carriers
and local retail channels. The influence of carriers
can be expected to rise in the new age of 3G/4G
wireless standards, which is expected to benefit HTC
product penetration. Apart from working with current
customers to expand markets and strengthen strategic
partnerships, HTC continues to discuss potential
cooperative projects with leading IT and telecom
companies in order to remain at the fore of market
trends. HTC is also developing the HTC brand and
strengthening relationships with channel retailers in
order to reduce business and sales concentration risks.
10. Effect upon and risk to the company in the
event a major quantity of shares belonging to
a director, supervisor, or shareholder holding
greater than a 10 percent stake in the company
has been transferred or otherwise changed hands
and mitigating measures being or to be taken:
As of the printing of this annual report date, no transfer
of significant portions of HTC share rights has occurred
with respect to any director, supervisor, or major
shareholder holding more than a 10 percent stake in the
company.
11. Effect upon and risk to the company associated
with any change in governance personnel or top
management and mitigating measures being or
to be taken:
There was no change in HTC managerial control in 2011.
12. Lawsuits and other non-litigation legal
proceedings related to the corporation; its
directors, supervisors, president, senior
executives; major shareholders owning greater
than 10% of outstanding shares; and corporate
subsidiaries, the results of which could
significantly affect shareholder rights and / or
share prices.
Major lawsuits, non-litigation legal proceedings or
administrative litigations currently involving HTC:
(1) In April 2008, IPCom GMBH & CO., KG (IPCom)
filed a multi-claim lawsuit against HTC with the
District Court of Mannheim, Germany, alleging
that HTC infringed IPCom's patents. In November
2008, HTC filed declaratory judgment action for
non-infringement and invalidity against three
of IPCom's patents with the Washington Court,
District of Columbia. In October 2010, IPCom
filed a new complaint against HTC alleging patent
infringement of patent owned by IPCom in District
Court of Dusseldorf, Germany. In June 2011, IPCom
filed a new complaint against HTC alleging patent
infringement of patent owned by IPCom with the
High Court in London, the United Kingdom. In
September 2011, HTC filed declaratory judgment
action for non-infringement and invalidity in Milan,
Italy. Legal proceedings in above-mentioned
courts in Germany and the United Kingdom are still
ongoing. HTC evaluated the lawsuits and consider
3. Future R&D plans and anticipated R&D
expenditures
Since its inception, HTC has invested consistently
to solidify in-house R&D capabilities. Today, R&D
professionals account for almost 30% of HTC's
headcount, and annual R&D investments regularly
represent 3 to 5 percent of total revenues. HTC products
are frequent trailblazers, earning a long line of "firsts"
that includes the world's first Windows Mobile and
Android smartphones, first dual-mode GSM/WiMAX
phone, first 3G Android phone, and first 4G LTE
Android phone. HTC Sense™, launched in 2009, was
a momentous breakthrough that revolutionized the
mobile phone experience. In 2011, HTC launched several
enhanced cloud and audio-visual services such as HTC
Watch and Beats Audio™, such exclusive service features
uniquely enhance and enrich the HTC user experience.
HTC has earned its leading position in the smartphone
sector through innovation and exceptional understanding
of industry and consumer trends. Nowhere is this more
apparent than in the Android and Windows Phone
markets. In 2011, with markets shifting up to 4G high-
speed mobile networks, HTC launched HTC Thunderbolt
and HTC Titan II - the world's first LTE Android LTE
Windows Phone smartphones. Milestones like these
further highlight HTC's leadership in critical technologies.
In the second half of 2011, HTC Sensations' integration
of superior Beats Audio™ sound technology delivers
unprecedented recording-studio quality that greatly
extends the smartphone user experience. Besides, HTC
Titan and HTC Radar meet a diverse range of user needs
running Windows Phone 7.5, Microsoft's latest mobile
phone OS.
In 2012 Mobile World Congress (MWC), HTC unveiled
its new HTC One series of smartphones that represent
its most premium mobile experience with a new level
of iconic design and amazing camera and authentic
sound experience. The HTC One series integrates
Android 4.0 (ICS) and features longer battery life and
high performance new quad-core mobile processor
and an amazing HD screen Super LCD 2 with custom
HTC ImageChip. With HTC Sense™ 4, the new version
of HTC’s branded user experience that is introducing
HTC ImageSense™, a new suite of camera and imaging
features that set HTC One apart from other phones. HTC
Sense™ 4 also includes broad enhancements to audio
quality and simplifies how people listen to music on their
phone.
4. Effects of domestic / foreign government policies
and regulations on HTC finances and response
measures
The Taiwan Financial Supervisory Commission (FSC)
requires listed companies to prepare financial statements
in accordance with Internal Financial Reporting
Standards (IFRS) starting from January 1, 2013. HTC has
setup an IFRS project team and has launched the project
plan for its IFRS adoption. In addition, the progress of
such adoption is regularly reported to the Board. As of
December 31, 2011, all potential significant difference
between IFRS and current accounting policy had been
identified. Full disclosure of the IFRS implementation
status was included in the footnote of 2011 financial
report. We will keep monitoring the update of IFRS
and the development of related laws and regulations
in Taiwan and evaluate the respective impact to HTC,
and will disclose such impact in 2012 quarterly financial
reports as required by law.
Apart from the above, changes in domestic and overseas
government policies and laws should have no significant
impact on HTC finances. We will remain vigilant with
regard to future changes and take measures that best
satisfy HTC's business operation needs.
5. Effects on HTC finances of changes in technology
and industry trends and response measures
Wireless telecommunications is an important growth
sector within the IT industry and the smartphone is its
flagship product. Responding to rapid mobile internet
growth and communication technology migration to
3G/4G, HTC has leveraged outstanding R&D capabilities
in partnerships with global telecom leaders to launch
numerous "world firsts" that include the world's first
Windows Mobile, Android, dual mode GSM/WiMAX,
and LTE Android mobile phones. The launch of a diverse
range of products through many carriers worldwide
has built up HTC's significant position in the global
telecommunications industry and created exceptional
business opportunities. HTC will continue to use its
resources to develop new technologies and enhance the
holistic user experience in order to deliver products and
services that fit market demand.
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