Alphabet's (GOOG 1.44%) (GOOGL 1.89%) Google is gearing up to launch a new chip for its own hardware devices, according to Axios. The chip, codenamed Whitechapel, was reportedly designed by Google and manufactured with Samsung's 5nm process.

Google recently received the first working versions of Whitechapel, which sports an 8-core ARM processor optimized for Google's machine-learning tasks. Axios claims the chips might start powering its Pixel phones next year, while subsequent versions could power Chromebooks in the future.

This report isn't surprising since the production of in-house chips would help Google challenge Apple (AAPL -1.04%), which designs its own chipsets and reduce its dependence on Qualcomm (QCOM -1.36%), the world's largest mobile chipmaker. But is Google really ready to cut ties with Qualcomm?

Android figurines.

Image source: Google.

The biggest problem with Android

Google has been quietly designing its own chips over the past few years. It initially focused on Tensor Processing Units (TPUs) for AI tasks, but gradually turned its attention to mobile devices to address the fragmentation of the Android market.

Unlike Apple, which produces its own hardware and software, Android devices run on myriad ARM-based chipsets. That hardware fragmentation, along with different versions of Android scattered across the market, can cause performance issues for its core apps.

Google initially tried to unify the Android market with its Android One initiative, which set minimum hardware requirements for devices and required OEMs to install stock Android instead of modified versions. Yet Android One still hasn't gained much momentum, since major smartphone makers like Samsung, Huawei, and Xiaomi prefer to install their own flavors of Android bundled with their own apps.

Turning Pixels into showcase devices

In response, Google started launching its own Pixel phones in 2016. These premium devices showcased the newest versions of Android without third-party bloatware, but some of the devices were met with mixed reviews.

Google's Pixel 4.

Image source: Google.

The first two Pixel phones were well-received, but the Pixel 3 initially encountered severe problems -- including a slow camera app, poor memory management, and screen problems -- before they were rectified with software updates. The Pixel 4 alsoshipped with various software problems. Those missteps were disappointing since Google acquired most of HTC's smartphone unit to improve its Pixel devices in 2018.

As a result, Google's Pixel devices didn't redefine the Android device market the same way Microsoft's Surface reshaped the laptop market. Instead, they remain overshadowed by devices from market leaders like Samsung and Huawei -- which both use first-party chips in some of their top-tier devices.

Google -- clearly noticing that Apple, Samsung, and Huawei all designed their own chips to maintain tighter control over the performance of their devices -- decided to design its own SoCs (system on chips) for its upcoming Pixel phones. Google's latest Pixels already use a few custom Google chips for machine-learning and image-processing tasks, so it's a natural next step to design a mobile SoC to eliminate its dependence on Qualcomm's Snapdragon SoCs. Axios claims Google's new chips will be optimized for "always on" services like Google Assistant, which tether users more tightly to its ecosystem.

What does this mean for Qualcomm?

Google isn't a top smartphone maker yet, but it's gaining ground in certain markets. Counterpoint Research claims the Pixel surpassed LG as the third-largest brand in the U.S. last year. StatCounter currently ranks the Pixel sixth in the North American market with a 2% share, but it hasn't cracked the top six positions in the global market yet.

In short, Google is a rising star in the crowded smartphone market, but it isn't big enough to move the needle either way for Qualcomm's chipmaking business. Even if Google installed Whitechapel chips in all of its new Pixel phones, Qualcomm could simply offset that loss with orders from other smartphone makers.

It's also going to be tough for Google to best Qualcomm's industry-standard Snapdragon SoCs in head-to-head comparisons -- that's why Samsung still installs Snapdragon SoCs in most of its phones, while reserving its first-party Exynos SoCs for select devices.

There's a chance that Google might sell its new SoCs to other OEMs. After all, Samsung sold some Exynos SoCs to Meizu, and Huawei's HiSilicon sold some SoCs to other Chinese OEMs. However, scaling up its chipmaking business to chase Qualcomm would be a costly affair that could quickly erode the higher margins of its core advertising business. Therefore, it seems more likely that Google will mainly reserve its new chips for its first-party hardware.

The bottom line

Google's new mobile SoCs could tighten its control over the hardware and software of its Pixel devices, showcase the power of its Android services, and give it an edge against market-leading rivals like Samsung. But it could be tough to match Qualcomm's performance, and launching a new Pixel device with an inferior chipset could tarnish its brand.

Either outcome won't matter too much to Qualcomm, which survived similar revolts from Samsung and Huawei before. Qualcomm's Snapdragon SoCs should remain at the top of the market, and most Android OEMs will continue to install those chipsets -- which bundle together a central processing unit (CPU), graphics processing unit (GPU), and baseband modem -- in their newest devices.