HTC is developing three wearable devices, including a smartwatch which uses Google Now to deliver information to the wearer, and a second smartwatch which will be demonstrated to mobile networks in Barcelona next week.
The first smartwatch is a prototype based on Qualcomm's Toq device and will be shown privately at the Mobile World Congress trade show, according to a person with direct knowledge of the company's plans.
Speaking to Bloomberg, the insider claims HTC is also working on a smartwatch which uses Google Now, and an electronic bracelet that plays music, although the company may not demonstrate these two products at the Barcelona show.
The Toq-based smartwatch will feature Qualcomm's Mirasol display technology, the source said, while the second device, based on Google Now, will likely feature an AMOLED screen.
HTC's third prototype is said to be a fitness band - similar to the Nike+ Fuelband - with a thin, touch-screen display, music playback, and activity-tracking features. The source added that HTC is yet to decide if any of the three products will go into mass production.
HTC has struggled in recent years against relentless competition from Samsung and Apple, and while its One range of Android smartphones has been widely praised, the company posted its 27th consecutive month of falling sales in February.
Having seen its share of the global smartphone market tumble from 10% in 2011 to just 2% in 2013, a move to broaden its product portfolio beyond smartphones could be crucial if HTC is to turn its fortunes around.
The nascent but growing wearable technology market could be the answer HTC is looking for - and partnering with Google to manufacture the search giant's widely anticipated smartwatch would be a huge opportunity for both parties.
After news of the smartwatch prototypes broke, HTC's share price rose 1.9% to close at NT$133.50, its highest level in a month.
Should HTC enter the smartwatch market, it will face competition from Samsung and its Galaxy Gear which, after a poorly-received debut late last year, is expected to be updated at, or soon after, Mobile World Congress. Sony is also a player in the market with its SmartWatch 2, and Apple is widely expected to announce an 'iWatch' in the next 12 months.