HONG KONG — Microsoft Corp. is striking a new alliance with China TechFaith, one of the country’s top handset design houses, in hopes of increasing the number of companies capable of creating smartphones based on Windows Mobile software.

The partners signed a tentative agreement earlier this week to cooperate in the areas of handset product and application development, collaborative sales and marketing and exchange of engineers and technology.

Techfaith, which includes Motorola and Nokia among its clients, has been looking to strengthen its design skills in high-end, higher margin smartphones—a play that has paid off for Taiwan’s High Tech Computer (HTC), which has been Microsoft’s primary partner for designing and selling handsets directly to network operators.

Techfaith is also increasing its R&D on 3G, including opening a U.S. lab, said Liu Jun, a senior vice president in charge of the smartphone division.

Until now, HTC has been Microsoft’s strongest partner in smartphone development. In the past few months, however, Microsoft has been making the rounds in Taiwan, looking to build other partnerships with the island’s ODMs. The deal with Techfaith is another sign of Microsoft’s desire to branch out from HTC.

Despite the deal, HTC should remain strong, based on its early lead and cumulative experience in the sector. It has also built relationships with European and U.S. operators, including Vodaphone, T-Mobile, Orange and Cingular.

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