Report: HTC targeting China with custom smartphone operating system

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HTC is developing a custom mobile operating system targeting the massive Chinese consumer market, sources told The Wall Street Journal.

Insiders said it is unclear whether the HTC OS will be entirely proprietary or will instead leverage a user interface built on top of Google's (NASDAQ:GOOG) open-source Android platform, noting that HTC's plans have changed during the past year.

HTC Chairwoman Cher Wang is closely monitoring development of the OS, which touts deep integration with popular Chinese apps including the Twitter-like microblogging service Weibo. HTC is currently testing smartphones running the software and prototypes are in the hands of Chinese officials, with a commercial launch expected by the end of 2013.

Taiwan-based HTC has struggled to remain competitive in the mobile device market as rivals like Samsung Electronics have gained momentum. HTC shares have lost close to 90 percent of their value since April 2011, when the company was second only to Apple (NASDAQ:AAPL) in U.S. smartphone sales. According to ABI Research, HTC was the world's 12th largest handset maker in the second quarter.

Earlier this month, DigiTimes reported that HTC is "likely to drift away from Microsoft's (NASDAQ:MSFT)] Windows Phone" in favor of going all in on Android, with industry sources saying that HTC is already re-thinking its Windows Phone strategy and shifting more of its attention to its Android efforts.

Sources said HTC is building the new OS in an effort to forge political and business ties in China, noting that a third-party platform stands little chance of competing against Android and iOS, which together account for more than 93 percent of worldwide smartphone sales. HTC's China-specific OS would instead play to Chinese officials' recent efforts to reduce the market's dependence on Android--legislators there have praised homegrown Internet giants Alibaba and Baidu for building their own operating systems.

During an investor call last month, HTC CEO Peter Chou identified the China market as an area for future growth. "We are very excited about the China market, because not many brands can play in that high-end segment," Chou said. HTC and China's Ministry of Industry and Information Technology did not respond to requests for comment.

For more:
- read this Wall Street Journal article

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