The Hottest Phone Maker You've Never Heard Of
HTC has become the company wireless carriers turn to when they go shopping for handsets.
By Matthew Maier

(Business 2.0) – When Bill Gates took the stage at a Microsoft developers conference in Las Vegas in May, he used his keynote speech to showcase one of the most advanced mobile phones ever created. Compact, loaded with cutting-edge features, and capable of surfing the Internet at broadband speeds, the lustworthy handset wasn't built by Motorola, Nokia, Samsung, or any of the other usual cell-phone vendors. Instead it came from High Tech Computer, better known as HTC--an upstart Taiwanese manufacturer that's best known for maintaining a low profile.

Indeed, despite the fanfare, one thing about Microsoft's new phone, code-named the Universal, marked it as a typical HTC product: The HTC logo didn't appear anywhere on the casing. That was no accident; HTC built its business around staying in the background. Though virtually unknown among consumers, HTC designs and manufactures some of the world's most popular portable devices, including Palm's Treo 650, Hewlett-Packard's innovative iPaq PDA, and the vast majority of Windows-based mobile devices. HTC's modest demeanor, coupled with its willingness to build highly customized phone designs in relatively low volumes, has made the company a favorite among wireless carriers such as Cingular, T-Mobile, and Vodafone.

One of the best-performing companies on the Taiwan Stock Exchange, HTC has doubled its sales since 2001, garnering a profit of $116 million on 2004 revenue of $1.2 billion. Known within the industry as an "original design manufacturer," HTC is on track to ship more than 3 million phones this year, twice as many as last year. And that's just the beginning: JPMorgan Chase expects sales of smartphones and wireless PDAs to triple in the next three years as prices come down and new features proliferate. Says JPMorgan analyst Johnny Chan, "HTC has positioned itself to be a smartphone master."

HTC's masterstroke was its decision to pursue wireless operators as its primary customers. Instead of selling its services primarily to device makers (as contract manufacturers Flextronics and Compal Electronics do for Motorola and others), HTC anticipated that carriers would want to nurture their existing relationships with consumers. Though it costs HTC as much as $10 million to design and build a new phone, the company encourages providers like Vodafone and T-Mobile to put their own brands front and center. Operators get to choose everything from the color of their phones to the user interface to the logo that appears on the screen. "Everything from the hardware to the software tells users that they're holding a unique phone," says HTC co-founder and president Peter Chou.

Though vendors like Nokia are typically willing to tweak their phones for different networks, they rarely offer major overhauls, such as changing a handset's user interface. HTC, on the other hand, will add or remove any feature to help carriers target specific markets. When Cingular recently started selling the Audiovox 5600--an HTC-produced smartphone for business users--the carrier asked HTC to develop two versions: one with a built-in camera, and one without for corporate customers concerned about security risks associated with camera phones.

Empowering cellular providers has brought HTC a steady stream of new business. Since 2002, when it created its first smartphone for Orange, the company has attracted nearly 50 carriers looking to create distinctive phones that meet operators' strict network specifications and feature requirements. "Customized phones are one of the only real selling points for wireless operators today," Chou says. "If they all sell the same Samsungs or Nokias, it becomes hard to differentiate."

Founded in 1997, HTC has 3,400 employees, nearly a third of whom now work on research and development. Many were recruited from companies like Texas Instruments, and most of HTC's senior management team came from microcomputing pioneer Digital Equipment. They're established players with ample consumer-electronics expertise, adding up to decades of experience working with Intel, Microsoft, and other computing giants to perfect software development and integration techniques. Indeed, HTC's software talent is one of its strongest selling points. When Microsoft began working on a portable operating system to compete with Palm in 1999, HTC was chosen as one of five launch partners for the Pocket PC platform. "We had one goal," says Microsoft mobile media group project manager Jason Gordon, "and that was to make a better PDA than Palm. HTC was a natural fit, since it already had a deep understanding of the Windows operating system."

Today, HTC is the world's largest producer of Windows-based wireless PDAs and smartphones. But perhaps the greatest testimony to HTC's prowess is that it was also tapped to help design and manufacture the Treo 650, the popular smartphone that runs on the competing Palm operating system. In 2003, HTC began working with Palm to help increase the Treo's battery life and reduce the amount of time it took to get the product to market. This year analysts estimate that HTC will manufacture more than 500,000 of the red-hot devices. "It's been a great match for us," Chou says.

Meanwhile, that slick phone held up by Gates last spring has already been ordered by Orange, T-Mobile, and Vodafone--each of which plans to customize the phone to highlight the capabilities of its network. With smartphones expected to be one of the big growth drivers of mobile telecommunications, Chou says HTC will partner with any carrier that has a next-generation network and a unique set of mobile Internet services or music download applications to showcase. You may never be aware of it, but you just might carry an HTC as your next phone--if you don't already.