Jonney Shih, the chairman of ASUS, reveals in a recent interview that the company will refocus its handset offerings to cater to gamers and power users. Shih admitted that it is difficult to compete in the smartphone market currently dominated by smartphone giants Samsung and Huawei, and the current business environment prompted the company to withdraw from the mainstream smartphone market. This decision could mean that users will see fewer smartphone models from the Taiwanese device maker that targets the entry-level and mid-range segments of the smartphone market, and based on the company chairman’s statements, it seems that the future ZenFone devices that ASUS will still launch will now target the premium section of the handset market.
Aside from power users, the company will likely release more gaming smartphones, presumably under its e-sports label ROG Phone. Shih noted that it holds a competitive advantage over other companies that may decide to enter the e-sport segment of the handset market in the near future by simply being one of the first companies that participated in the gaming smartphone market. ASUS’s chairman further highlighted the potential of the gaming smartphone market as a whole, especially since users from a wide variety of demographics regularly game on their mobile devices, and even if gaming handsets only comprise a small percentage of the total handset sales, it would still translate to millions of units shipped to consumers. Furthermore, Shih considers ASUS’s comprehensive ecosystem of gaming peripherals and computer components as an important strength of the company, and it could complement its current and future gaming smartphone offerings. Nonetheless, this shift in ASUS’s mobile device strategy will cost the company NT$6.2 billion, which roughly translates to $201 million at the current exchange rate, and this cost covers inventory losses and royalty amortization of its mobile phone division.
Another important news coming from the Taiwanese tech firm is the departure of the company’s CEO for 11 years, Jerry Shen. He served the company for 25 years, and he was credited with the development of innovative products, including the EeePC lineup of netbooks and the Transformer series of convertibles and detachable laptops. After serving as CEO since 2008, Shen will become the chairman and CEO of iFast, an Artificial Intelligence of Things (AIoT) startup that is 30-percent owned by ASUS. He will be replaced on January 1st by two co-chief executives, namely S.Y. Hsu and Samson Hu. S.Y. Hsu currently heads the company’s PC business while Samson Hu is the leader of ASUS’s global customer service operations.
Background: Based on previous reports, it seems that the mobile phone division of ASUS has lost money over quite some time, although the company was optimistic that its mobile unit would return to profitability due to the launch of the ZenFone 5 and ROG Phone lineups. ASUS’s decision to release fewer devices in the entry-level and mid-range markets is reminiscent of what Sony attempted to accomplish back in 2015. This strategy aims to increase the profits obtained from the smartphone division, although this also results in a significant reduction in total unit sales and market share.
Impact: Given the intense competition in the smartphone market which is further worsened by the decline in smartphone sales, many companies are employing strategies to either increase their market share or improve the profitability of their mobile phone divisions. ASUS will likely have a difficult time catching up to Samsung or Huawei in terms of market share, so it seems logical that the tech firm instead employed the strategy of focusing on smartphones marketed towards gamers and power users. While this strategy may negatively impact the division’s revenue, it could improve the profitability of the mobile phone unit, which should allow the company to continue supporting its customers in the long run.