HTC 2015 Annual Report Download - page 74

Financial status, operating results and risk management
Financial status, operating results and risk management
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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.Inthemeantime,in
order to timely respond to the fast-growing and coming to mature LTE technology and market, HTC
continues to invest more developing resources to ensure HTC devices to fully meet the demands of
global telecom carriers to ensure HTC's leadership position in 4G market and technology. 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 all high-end, mid-end, and low-end segment market
demands.
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
Inresponsetoglobalmarketdemandforsmartphonedevicesandconnecteddevices,inadditiontothe
continuous review and improvement of manufacturing processes to improve production capabilities,
quality, and cost savings, the margin of low and middle price tier smartphone is getting lower. The
professional assemble subcontractor in both production line deployment and production skills can
easilycreateeconomyofscale.ThereforeHTCconsidersoutsourcingOEM/ODMproductionofsome
low-price tier smartphone to create price competitiveness. There is no demand for plant expansion.
9. Concentration risks associated with goods received and sold and
mitigating measures
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.
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 is no change on management team in the past 1 year.
12. Lawsuit:
(a)InApril2008,IPComGMBH&CO.,KG(“IPCom”)filedamulti-claimlawsuitagainsttheCompany
withtheDistrictCourtofMannheim,Germany,allegingthattheCompanyinfringedIPCom’s
patents.InNovember2008,theCompany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theCompanyallegingpatentinfringementof
patentownedbyIPCominDistrictCourtofDusseldorf,Germany.
InJune2011,IPComfiledanewcomplaintagainsttheCompanyallegingpatentinfringementof
patentownedbyIPComwiththeHighCourtinLondon,theUnitedKingdom.InSeptember2011,
theCompany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.
The Company evaluated the lawsuits and considered the risk of patents-in-suits are low. Also,
preliminaryinjunctionandsummaryjudgmentagainsttheCompanyareveryunlikely.