HTC to boost R&D in own-brand drive

High Tech Comptuer (HTC)'s Chief Executive Peter Chou speaks at the Reuters Global Technology, Media and Telecoms Summit in Tokyo May 20, 2008.

TAIPEI (Reuters) - Taiwan's High Tech Computer Corp (HTC) (2498.TW), the world's top smartphone maker, said on Tuesday it will sharply boost its product development resources this year as it plays up its high-margin branded business.

The company is also aiming to boost 2008 sales by up to 30 percent on surging demand for its own-brand HTC touchscreen mobile phones in both mature and emerging markets, such as China and India.

"We're on track in meeting the high point of our (revenue) forecast and we feel very good about that," Chief Executive Officer Peter Chou said at the Reuters Global Technology, Media and Telecoms Summit in Tokyo.

The sales forecast was in-line with revenue growth of 29 percent to T$154 billion ($5 billion) expected by 21 analysts on Reuters Estimates.

The strong growth comes as HTC shifts toward more lucrative development of its own brand phones, and away from contract manufacturing for other brands, which has dwindled in recent years and now makes up only about 10 percent of its business.

Chou said his firm's R&D spending should grow by 10-15 percent this year from last year's $100 million, with plans to increase its engineer headcount by 300-500 by yearend from more than 2,000 currently.

The company is also building a new factory in Shanghai that will start production this fall, as it diversifies its manufacturing to lower-cost China from its main base in Taiwan. HTC also operates a factory in the Chinese city of Suzhou.

The company, whose phones compete with Apple's APPL.O iPhones, also said it expects to be the first to launch a model with Google's (GOOG.O) Android operating system by the end of the year ahead of other rivals.

Android phones, using a Linux-based open source operating system, will allow users to tweak and customize their own user interface, differing from traditional Windows or Symbian based handsets.

"The Android phone would be priced lower than HTC's new smartphones and it will also target a new consumer segment so we don't see it having a negative impact to its high-end phones," said Jennifer Liang, an analyst at KGI securities.

TOUCHSCREENS

Founded in 1997, HTC also has high hopes for its new Diamond touchscreen smartphone, with plans to sell the models in Japan, China, India, and the United States later in the year, Chou said.

It is collaborating with Japan's top mobile phone operator, NTT DoCoMo (9437.T), Softbank (9984.T) and EMobile, said Chou, an HTC co-founder and 20-year industry veteran.

Following HTC's and Apple's success with touchscreens, Nokia (NOK1V.HE) is set to launch its own such phone this year and media reports say Blackberry maker Research In Motion (RIM.TO) (RIMM.O) is also developing a model.

"We're really trying to expand product portfolio into new segments," said Chou, displaying a black Diamond phone.

HTC has sold more than 3 million of its self-branded HTC Touch mobile phones since June last year and expects to ship more than 3 million Diamond phones this year.

"Diamond will be the best seller in HTC history and we expect sales to be double those for its previous Touch series, with five to 10 global carrier adoptions," said Goldman Sachs analyst Joey Cheng in a recent research report.

Emerging market demand will also be a key driver for HTC and the firm is expecting sales to grow 60-70 percent in China, and more than 100 percent in India this year.

Goldman Sachs rates HTC at "buy" and sets the firm's 12-month target stock price at T$910.00, 5 percent higher than its Tuesday closing share price of T$865.00.

Shares of HTC have jumped 44 percent so far this year, compared to a 6.6 percent gain on the benchmark TAIEX index .TWII.

(US$1=T$30.5)

(Reporting by Sheena Lee; editing by Ken Wills)