We propose a novel lateral bandgap engineering technique to improve electron transport in the channel of an AlInAs/GaInAs HEMT. Electrons are launched at the source with higher velocity by a launcher (higher bandgap AlInAs source) and collected at the drain by a heterojunction collector (lower bandgap InAs drain). The resulting device, a Lateral Bandgap Engineered HEMT (LBE-HEMT), is analyzed using DAMOCLES, a 2-D Ensemble Monte Carlo and Poisson Simulator. Electron velocity profiles in the GaInAs channel are generated using DAMOCLES. Effect of band gap engineering on the electron velocity and its variation with drain bias is discussed. It is observed that the ensemble velocity of electrons in the channel is increased and velocity degradation at high drain biases (which are required to achieve a high f(max)) is minimized. Thus the f(t), f(max) tradeoff in conventional FETs can be alleviated using lateral bandgap engineering,.