Will Google Design Its Own Smartphone Processors?

#Alphabet 's (NASDAQ:GOOGL) (NASDAQ:GOOG) #Google recently announced its first in-house smartphones, known as the #Pixel and the #PixelXL (a larger variant of the Pixel). These are premium devices, starting at $649 for the base Pixel model (5 inches) and $769 for the base Pixel XL model (5.5 inches). These phones currently use a Snapdragon 821 applications processor produced by wireless chip giant #Qualcomm (NASDAQ:QCOM). However, according to Bloomberg, Google has expressed interest in building its own custom silicon out in time. This leads to a very interesting question: Will Google develop its own applications processors for future Pixel smartphones? Google could probably do it Putting together a reasonably competent smartphone-oriented applications processor these days isn't too difficult, especially if one has the money to spend (and Google can clearly afford it). Many of the key intellectual properties that go into a mobile processor -- CPU cores, graphics, memory controllers, eMMC, and so on -- can be licensed from third parties such as ARM Holdings, Imagination Technologies (NASDAQOTH: IGNMF), and Synopsys (NASDAQ: SNPS). One major hurdle that Google would undoubtedly face in trying to build its own custom chip is the fact that it could not easily license a cellular modem to integrate into such a chip. Google would either have to spend a lot of time, money, and effort to even hope to build a reasonably competitive cellular modem or it would need to use stand-alone modems from the likes of Qualcomm or Intel (NASDAQ: INTC), the two suppliers of modems into the latest iPhone. The stand-alone solution is less than ideal because the current Pixel phone uses a chip that integrates the modem onto the same piece of silicon as the applications processor, which helps to reduce board size as well as power consumption. Apple (NASDAQ: AAPL) has been dealing with stand-alone modems for as long as the iPhone has been around, but for Google it would represent a step back from the solution that it's already using.

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