What does it mean to make a 'superior' product anymore?
The low end is built on no margins. They just don't have the economies of scale to compete at the low end; I think that much is clear. You can't compete on price anymore, because the next guy can sell for a penny less, and that may be your entire profit margin. That's not hyperbole--at some point HTC (I'm pretty sure it was HTC) was making an average profit of only 1-2c per phone. Untenable.
So you need a product differentiator--and what is that? You run the same OS as everyone else, everyone hates it when you mess with the default OS skin, so...hardware features? But differentiating on that basis requires pretty big features now; things that nobody has, by definition. The only way to recoup that sort of outlay is by going to the high-end.
HTC can no longer afford to care if you can't afford their phones. They have to move up-market because that's the only place where they have any potential to make money, and they can cut the costs of sourcing lower-spec components and designing those lower-spec phones. They can move this year's model down one tier next year, and sell that as their 'discount' phone since they'll hopefully already have made enough money on those phones that any additional sales are basically just pure profit.
If they don't make money at the high end, they're doomed as a handset maker; there's nowhere else to go except out of this market.