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Android phone manufacturer HTC has been floundering for several years, but the company could soon collapse altogether. The market price of HTC has now fallen below the value of its own cash reserves (HTC currently holds roughly $1.4 billion in cash). Taiwanese investors and analysts brutally evaluated the company’s position. One, Calvin Huang, told Bloomberg that “HTC’s cash is the only asset of value to shareholders. Most of the other assets shouldn’t be considered in their valuation because there’s more write-offs to come and the brand has no value.”

HTC’s decline has been swift — as recently as 2011, the company was valued at $28 billion, but it failed to compete effectively against Samsung or a surge of upstart mainland China brands. Now it’s hanging on to a fraction of its former market share, and it’s forecasting third quarter sales could fall a further 48%. Inventory has jumped 60%, which further underscores the company’s problems in moving product.

HTC isn’t the only Android manufacturer on the rocks

It would be easy to chalk this up to the company’s failure to innovate, especially since the HTC One M9 is basically a retread of the One M8, which is a retread of the One M7. Look around the Android market, and it’s Apple that captures north of 90% of the device market’s profits. Samsung soaks up the little that’s left, and manufacturers like LG, with its well-received G3 and G4 family, tend to make around 1 cent per phone in net profit. It’s hilarious to think that smartphone profit margins are so terrible that these companies would be envying the likes of Dell or HP, but that’s the market as it currently exists. HTC’s device protection plan might have been awesome, but it clearly hasn’t helped move that many phones.

There are several reasons why the Android market has ended up in this position. First, there’s the simple fact that Android manufacturers collectively build hundreds, even thousands of new devices every year. This is particularly acute at Samsung, but none of the major Android developers focus on a handful of devices. Each device has to be validated for its specific market, and each must be assembled, tested, and then marketed to customers.

Image courtesy of OpenSignal. Each box represents a phone SKU and market share.

Even if R&D, validation, marketing, and distribution costs are small relative to net revenue for any given device, the sheer number of devices eventually adds up to a substantial sum of money. The sheer number of devices also becomes a security problem. One of the reasons why Android’s security model is so broken is because the sheer number of devices that need security updates would completely overwhelm the resources of any OEM to actually deliver a patch. If Apple wanted to patch a security flaw on every single iPhone going back to the original, it would only need to patch 10 different devices. Samsung released 56 devices in 2014 alone. Carriers have pledged to improve security, but at one cent per device, don’t expect miracles.

The other issue for Android OEMs, albeit one we don’t have much visibility into, are the licensing and patent fees that OEMs pay to everyone but themselves. Android may have a free open-source option, but anyone who wants to offer a serious platform either licenses Google’s own Mobile Services or creates their own infrastructure from whole cloth, like Amazon. Google isn’t the only company that gets royalties and payments, either — other companies, like Microsoft, make a tidy profit in licensing patents tied to Android.

The current market isn’t sustainable, and it suggests that the OEMs most likely to remain in the Android market are those that can survive a poor release cycle or product miss by drawing on cash reserves and earnings generated by other sections of the company. Samsung and LG fit that requirement, while a company like HTC doesn’t. Whether we’re going to see a push towards even fewer phone models and better device security, however, remains unclear. Until phone manufacturers make fundamental changes, it’s going to be extremely difficult to make any money off of Android. Even companies like Samsung have seen both profits and sales fall this year, which only furthers the need to take action and cut costs.