HTC has closed a production line

According to the latest news, HTC has closed at least one of the four major production lines, which accounts for at least one-fifth of its total production capacity, and has begun to outsource smart phone manufacturing work, because sales are facing a downward pressure on cash flow.

HTC released the latest model of the One series of flagship phones this year, but it did not cause much repercussions in the market. HTC announced its first loss report since its listing this month. As of the end of June, cash flow was negative at $7.0727 billion.

HTC has denied closing production lines in Taiwan or elsewhere in China, and declined to comment on whether to negotiate outsourcing manufacturing business. HTC said in an e-mail to Reuters, "HTC has not closed down, or plans to sell any manufacturing plants. HTC has sufficient liquidity and will publish the latest financial information on the financial analysts conference call."

HTC chief marketing officer He Yongsheng declined to disclose details, but said, “Like other factories, we are only optimizing the production line. Whether or not to open the production line depends on the market demand and our expectations, and the output needs to match the market demand.”

Two sources said that HTC will reduce its production line in Taoyuan from two to one, and its monthly production capacity will be reduced by about one million units. HTC's factory capacity in Taoyuan is 2.5 million per month, and the production capacity of other local factories is approximately 4 million. One of the sources said that most production lines at the HTC Shanghai plant have been discontinued and only a small amount of mobile phones for sale in mainland China have been produced.

Two sources pointed out that HTC considers the sale of stop production lines located in mainland China and Taiwan. One of the sources said that "the cash flow of HTC is not good and we must take steps to obtain cash."

According to four sources, HTC is considering outsourcing some of its handset manufacturing to Foxconn, and it is also negotiating outsourcing deals with Compal and Wistron. One of the sources said that HTC management has agreed to separate design and manufacturing operations.

However, sources pointed out that even if HTC separates the design and manufacturing business, HTC will retain some of its manufacturing plants in the early stages. Because separation itself is a long process, HTC may also be exploring the possibility of manufacturing mobile phones for other companies.

HTC CEO Zhou Yongming said in a meeting on Tuesday that the company does not rule out the possibility of separating manufacturing and design operations.