TAIPEI—HTC Corp. is developing a mobile software system specifically for Chinese consumers, people familiar with the project say, as part of a big China bet that the Taiwanese smartphone maker hopes will help revive sliding sales.
Development of the smartphone operating system is being closely monitored by HTC's Chairwoman Cher Wang, who has been in discussions with Chinese government officials, said the people. The software involves deep integration with Chinese apps like the Twitter-like microblog Weibo and is slated to launch before the end of the year, they said.


European Pressphoto AgencyChief Executive Peter Chou held the HTC First phone during a news event in Menlo Park, California, April 4.

The project reflects the growing pull of Chinese buyers, as well as China's broader efforts to develop homegrown software to counteract U.S. tech giants like Google Inc. and Apple Inc. For HTC, it also would be the final fruition of plans to build its own OS, a goal that the company voiced two years ago. Although many of HTC's employees speak Chinese, making it natural for the company to do business in China, the brand is still a newcomer in China. HTC has been selling under its own brand in China since 2010, having sold there under the Dopod brand previously.
HTC's China-specific software would play into a wider Chinese government policy to encourage the development of a unique local software ecosystem to reduce reliance on Western companies. China's technology ministry said in March in a white paper that the country's mobile industry is too dependent on Google's Android operating system, and it praised Chinese Internet giants Alibaba Group Holding Ltd. and Baidu Inc. that have created their own systems.
Google's relationship with Beijing soured in 2010 when the company stopped censoring its search results in China. Google's search engine was subsequently banned in China, and its app store there has only limited offerings. The result is holes in the China Android experience that have allowed for some locally developed software to take root, said IDC analyst Teck Zhung Wong.
But some of this homegrown software has been controversial. Taiwanese PC maker Acer Inc. had to abruptly cancel the launch of its smartphone running software made by Alibaba last fall, after Google accused the operating system of infringing on Android and threatened to stop working with Acer. Alibaba has denied the allegations.
It is unclear whether HTC's China operating system will be entirely proprietary or will build on top of Android. Plans have changed over the past year over whether it would be an entirely different operating system or a user interface built on top of Android, said one person familiar with the matter.
Like Acer, HTC is part of Google's Open Handset Alliance, which requires the companies to abide by certain regulations set by Google.
Smartphones running the operating system are now in testing, and some prototypes have been sent to Chinese officials, two of the people said.
China's Ministry of Industry and Information Technology didn't immediately respond to a request for comment.
HTC's efforts to woo Chinese consumers come as the company's global business is suffering. Once the leading Android smartphone maker in its stronghold market, the U.S., HTC has seen its market share slide in the past two years amid product delays and unsuccessful marketing campaigns. The company now expects to post an operating loss in the third quarter, its first since its initial public offering in 2002, and analysts have raised the prospect that it could be a takeover target.
The project is seen by HTC insiders partly as an effort to forge political and business ties in China, since third-party operating systems have little chance of actually competing against the dominance of Android and Apple's iOS. In the second quarter, Android held 79% of the global smartphone market, while iOS snagged 14.2%, according to market research firm Gartner. No other operating system captured more than 4%.
HTC wouldn't be the first to experiment with mobile operating systems for smartphones. Samsung has long been investing in its own mobile system called Bada but consumers haven't been receptive. Now the South Korean company is pouring its investment in an operating system called Tizen which it is developing with jointly with Intel Corp. Meanwhile, Finnish startup Jolla Ltd., which was formed by former Nokia engineers, launched the Sailfish operating system earlier this year.
As for HTC, the company has been making broader changes to its China strategy this year, including changing its China chief earlier this month.
HTC Chief Executive Peter Chou also singled out the China market in an investor call last month as an area of growth.
"We are very excited about the China market, because not many brands can play in that high-end segment," Mr. Chou said.
—Lilian Lin in Beijing contributed to this article.Write to Eva Dou at [email protected]