HTC CEO on Facebook rivalry, VR, and the company’s new vision

HTC was once one of the most prominent smartphone makers in the world, but competition from Apple and Samsung proved too tough to beat. In 2018, the Taiwan-based company ended up selling off a large chunk of its smartphone business to Google, and 2019 saw revenues decline 58%, down to roughly $333 million from $789 million a year earlier.

To right the ship, this past fall HTC brought in a former executive from telecom giant Orange, Yves Maitre. The Frenchman has promised to lead the struggling tech giant into a new era, doubling down on previous investments in virtual and extended reality with the HTC Vive product line.

Now, HTC is announcing three new VR products as part of the “Cosmos” series, a PC-based VR headset. The new products—Cosmos Elite, Cosmos XR, and Cosmos Play— are interchangeable faceplates that attach to the Cosmos headset, allowing different functionality for varying levels of users and developers.

Maitre sat down with Fortune on Jan. 31 to discuss the new products, his “continuum” approach to merging virtual reality and reality, and HTC’s “new vision” ahead of a reveal at the MWC Conference scheduled for late February in Barcelona—but the trade show was cancelled over fears of Coronavirus.

This conversation has been edited and condensed for clarity.

HTC hasn’t had a great past few years financially. At a TechCrunch event in October, you said that HTC had “stopped innovating in the hardware of the smartphone,” and that you were now focusing on virtual reality. Is it safe to say that virtual reality is the priority for the company now?

Maitre: I would like to correct myself a little bit. It’s probably been misinterpreted, or I misexpressed myself when I said we stopped investing in smartphones. We didn’t stop investing in smartphones. What we tried to do is to continue the smartphone business, and we are, but the smartphone business in terms of innovation is plateauing a little bit. If you look at manufacturers—and I will not name anybody else other than HTC obviously—but the smartphone between the version “N” and “N+1,” there’s not so many big changes.

Now, yes, the results of 2019 are what they are. And I’m on board to restart the company. I believe that we have a new vision, which is a continuum between reality and virtual reality. And in order to make this vision true—and that we will be able to measure true figures—we are promoting and putting in place a new portfolio with a new vision. This new portfolio is based on a segmented approach, based on hardware that you can upgrade.

And how will you execute this vision?

We have decided to focus on three main key pillars. The first pillar is to help developers create content, to store the content in a very safe way, and for customers to access that content. This is business-to-consumer as well as for business-to-business. This is Viveport. This is our ecosystem of developers. Our APIs. Everything which is done, including tools, we give to developers. Our job is not to do the job of developers. Our job is to listen to developers, to listen to their community, to listen to enterprise companies, and try to help them do the best content, through the best hardware, through the best software. And to be in a position to have their content somewhere in a store that customers will know and be able to access.

The second pillar is play: how to play this content. We have the smartphone. We have a portfolio of headsets aligned with our segmented approach strategy. And for this one, it’s very clear that the position we have is to be No. 1 globally. And not only in some counties—you have opportunity if you are in China to buy our headset in China, or Abu Dhabi, or the U.S. here in New York, or in Paris, or in Berlin. The second thing is we position ourselves for mid-tier and high-end. It doesn’t mean we will not have other devices. It doesn’t mean that we will not respect these people, but this is not where we want to be. We will be No. 1 where we are used to playing, which is mostly high-tech.

The third pillar is what I call distribute. It’s good to have content. It’s good to have a headset. But what are you doing with that? I want to make sure content moves from one place to the other in the right way. This is not the job of HTC; this is the job of [phone] carriers. But the 5G technology will open a lot of opportunities. We need to understand the need of the carriers— Verizon, AT&T, China Mobile, Orange—and how they want to carry this content. What can we do to optimize our device to their network? What can we do to also make sure that consumers will pay the right price?

We’ll never be a carrier; we’ll never be an Ubisoft or big content makers. But what we want to do is make sure that the entire experience isn’t only the best experience across all three pillars, but also in terms of price positioning, the right price. When we talk about price we have to really talk about the price of the entire experience, not only the price of the hardware.

When you talk about price, a lot of people right now would associate that with Facebook and Oculus, which sells the standalone Oculus Quest VR headset for just $399. Do you want to appeal to that market as well, or are you focused more in mid-tier and enterprise solutions?

The market is going to arrive. I really appreciate Facebook helping us because we have been the only one, the first one, to make the market become a reality. When you are the only one to make a market, it’s pretty heavy. Remember the car industry 120 years ago, there were several guys like Ford, Delage, Benz, Bugatti, and altogether they were making the market a reality so that the horse is now a horse, and a car is now a car. So we are at the period of time where we are building a market. And when you build a market there are several ways. Our approach from a hardware perspective is more of a segmented approach, where we try to understand what the experience should be, and what our customers want. Mostly B2B enterprise. They are very, very precise. We started with a very accurate precision type of product, and we go down in terms of the precision to a normal user.

What Oculus is doing is going mass market. What they are doing is trying to make a robust product very price-oriented and black. Kind of like a Henry Ford, T Model. Where we are more of a European way of making cars where it’s more of a segmented approach, trying, for each segment for each need, to provide something that’s more dedicated to what you want to do. They are two different types of approach.

We are very pleased to have as a partner, competitor—whatever you call it—people like Facebook, a strong company. Together, we are creating this market.