In recent years, hydrophobic surface has attracted much attention for its potential applications in flow drag reduction. This article focuses on the drag reduction mechanism of hydrophobic surface by the multi-relaxation-time scheme and the Shan-Chen multiphase model of lattice Boltzmann method. At first, we validate our method through the multiphase cases of wall adhesion effect and the single-phase cases of flow around a square column, showing that the results from our method are in good consistence with those in previous literature. Then, we simulate and analyze the typical problem of flow around a square column with hydrophobic surface while Reynolds number is 100, in order to investigate the influences of contact angle and gas holdup of the inlet flow on drag coefficient and lift coefficient. The simulation results show that for a given contact angle, hydrophobic surface is capable of reducing drag when gas holdup of the inlet flow is in a certain range; otherwise, drag coefficient will increase. With an appropriate gas holdup of the inlet flow, both drag coefficient and lift coefficient will decrease as the contact angle becomes larger. Finally, we compare gas holdup contours and the corresponding streamline patterns under different drag coefficients. Analyses suggest that the increases of drag coefficient and lift coefficient are related to the gas mass shedding near the square column wall where the eddy forms. Increasing the gas holdup of the inflow is properly conducible to reducing the gas mass shedding and also both drag coefficient and lift coefficient greatly if contact angle is too large. However, if the near-wall gas holdup is saturated, it will aggravate the instability of gas holdup and change the near-wall gas holdup a little, which makes drag coefficient increase slightly. When gas holdup of the inlet flow is appropriate, the near-wall gas holdup becomes steadier with a larger contact angle. Through analysis we note that for hydrophobic surface, the key factor of drag reduction is to keep the near-wall gas layer stable, with which the effect of drag reduction becomes better as the contact angle becomes larger. However, the larger the contact angle, the more sensitive to the change of gas holdup both drag coefficient and lift coefficient are, so it is not recommended to adopt the hydrophobic surface with very large contact angle. With the analysis of the gas holdup near hydrophobic surface with different contact angles, in this article we put forward a new approach to the further exploration of the drag reduction mechanism of hydrophobic surface.