There are benefits and drawbacks to this. One benefit is that focusing on releasing just a few models per year allows manufacturers to focus on the quality of each and every smartphone they release. HTC can also focus on delivering updates much faster when there are fewer devices to manage. This strategy can also increase the manufacturer's prestige (just look at the brand loyalty at Apple, which releases a new iPhone only once every year or so).
But the drawback to releasing fewer models is that fewer price points could lead to less profit. Lower-tier smartphone buyers get lost in the shuffle.
Of all the cheap smartphone markets, China is (of course) the largest and most important. This is where Samsung and Motorola are competing with lower-tier devices for folks who have never before owned a smartphone. Entry-level smartphone buyers are incredibly important to manufacturers, but with this news it seems HTC is more interested in targeting the real Android fanboys. It'll certainly do good things for their brand.