TAIPEI -- Google has begun test production of a 5G smartphone that it may unveil as soon as next week as part of its aggressive expansion into branded hardware that aims to steal a march on Apple and tie in consumers to its search and cloud-computing services.
Sources told the Nikkei Asian Review that as well as working on the new 5G smartphone, which Google could announce at its launch event for new products on Oct. 15, the search giant will unveil two new 4G Pixel smartphones, as expected, and possibly a new smart watch and notebook too.
Such hi-tech gadgets are central to Google's strategy to entice consumers with its own-branded hardware and thereby integrate them ever-closer with the company's better known search engine and artificial intelligence-driven software.
"The two [Pixel 4] smartphones are already going into mass production and will be ready to ship after Google's [new products] unveiling next week," one of several sources close to the situation said. "Google is also working on a version with 5G technology, which is in test production."
A marketing splash generated by Google's move into 5G phones, which would be the first by a U.S. company, presents a direct challenge to Apple and other leading hardware and handset makers such as Samsung Electronics and Huawei Technologies.
It would also throw down the gauntlet at Microsoft, Google's biggest U.S. rival in search and software, which announced a return last week to the highly competitive smartphone market with its own folding model, after it exited in 2016.
Google has made no secret of its aim to move into hardware although the apparent acceleration of its investment plans, combined with the company's deep pockets, will raise the pressure on competitors. Alphabet, Google's parent, has around $117 billion in cash, while Apple has $102 billion.
"Bringing together software and hardware ... does have a lot of synergistic value ... and the main way to do that today for our core [search and software] products is by using hardware," Google CEO Sundar Pichai, told analysts in a February conference call. "As we scale up our hardware efforts ... you can definitely glimpse the future."
As a relative newcomer to the global smartphone market, Google's Pixel phone series still has less than a 0.5% market share. But that is growing exponentially. This year the company aims ship as many as 10 million phones, sources said, more than twice last year's level.
"Although Google's smartphone shipments are still small, it's one of the clients that still has healthy volume growth," another source said. "It offers better prices for suppliers too."
Google's 5G model is currently being test produced in China. But to avoid U.S. tariffs from the China trade dispute, and to source cheaper labor, all Google production destined for the U.S. will eventually be made outside China. A leading option is a Vietnamese facility due to be ready by the end to the year, as the Nikkei Asian Review first reported.
Google may eventually decide to unveil its new 5G model in spring next year, the sources said, alongside the release of a budget Pixel phone. But that release date would still put Google ahead of Apple in the race to produce the next generation of 5G phones.
The Google 5G handset will come with a Snapdragon 855 mobile platform, made by U.S. chipmaker Qualcomm, the sources added. Meanwhile the new flagship Pixel 4 series will sport advanced organic light-emitting diode screens, like Apple's premium iPhone 11 Pro and 11 Pro Max models launched in September.
Google did not respond to requests for comment.
Nikkei staff writer Kensaku Ihara in Taipei contributed to this report