TCAD is gaining acceptance in the heterostructure industry. This article discusses the specific challenges a device simulator must manage to be a useful tool in designing and optimizing modern heterostructure devices. Example simulation results are given for HEMTs and HBTs, illustrating the complex physical processes in heterostructure devices, such as nonlocal effects in carrier transport, lattice self-heating, hot-electron effects, traps, electron tunneling, and quantum transport.