The company was rumored early on to be making a handset for Google as was South Korean handset giant Samsung Electronics. But with the Monday launch of Google's mobile phone software, called Android, HTC was able to lift the veil of secrecy around its plans.

Android, an open source software platform that includes an OS, is designed to take advantage of Internet services for mobility, exactly the target for HTC's new handset, said John Wang, chief marketing officer at HTC. He declined to give specific details about the hardware makeup of the phone.

The strength of Google's new platform is its flexibility, since it will allow companies to innovate with their own software and services, said Wang.

The Google phone that HTC is working on could end up causing it some headaches. HTC is known as the world's largest maker of handsets that use Microsoft Windows Mobile software, a rival to Android. Should Android's popularity take off, HTC could cannibalize some of its own sales as well as those of partner Microsoft.

That's certainly not HTC's intention.

"Our commitment to the Windows Mobile platform is unwavering," Wang said, adding that many mobile phone OSes currently compete in the market.

Android could become a potent new rival to Windows Mobile and other handset OSs. At the launch ceremony, Google announced that over 30 companies had climbed on board its Open Handset Alliance, including HTC, Qualcomm, and Motorola.