Apple Inc. (NASDAQ:AAPL) will face increased competition in the smart phone market next year, according to news from inside Google Inc (NASDA:GOOG). Motorola Mobility is designing a new smart phone hand set to compete in the premium market. What is special about the news is that the phone will be designed with Motorola’s parent company Google.

Google X Phone

The phone, which has been internally dubbed the “X Phone”, will be released next year according to a Wall Street Journal report. That report quotes “people familiar with the matter” as its source. The phone is part of a Google strategy to increase its market share accorded to Motorola.

Apple Inc. (NASDAQ:AAPL) will hardly be quaking at the news of a vague phone with a 2013 release date, but it is certain the firm will take some notice of today’s announcement. The company is currently the most prominent in the smart phone market.

This is, of course, not the first battle between Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG). The firms have clashed again and again in patent disputes, with both claiming victories. This will also not be the first time Google has designed its own device.

One of the flagship Android devices is the Nexus line. The devices are co-designed by Google Inc (NASDAQ:GOOG) and an Android partner. This year Google announced a range of tablets in its Nexus line. It is not the first time the company has entered the market, and, despite some successes, none of those devices has formed a great rival for Apple Inc. (NASDAQ:AAPL) yet.

Apple Inc. (NASDAQ:AAPL) will not be facing an unknown competitor with the announcement of the “X Phone”. It will probably bear the hallmarks of Google’s previous design efforts, and will probably run an unmodified version of Google’s Android.

After Google Inc (NASDAQ:GOOG) acquired Motorola last year, some handset manufacturers were worried Motorola would be given a substantial competitive advantage in the market. So far nothing of the sort has transpired, Google kept the firm at arms length in order to keep partners happy. That is no longer the case.

Apple Inc. (NASDAQ:AAPL) may not need to be overly worried about this development, but Android manufacturers may need to be. If Google Inc (NASDAQ:GOOG) takes to favoring devices designed at Motorola, it could cause rupture in the Android community. Hand set manufacturers, with a plausible alternative in Windows Phone 8, may begin to abandon the search giant.

Motorola currently accounts for less than 3% of all Android devices sold. The firm was under performing long before Google became involved, but that involvement has failed to change the company’s fortunes. Executives and employees will be hoping that the “X Phone” has the power to do just that.

Rumors of a Google “X Phone” are sure to pick up steam in the early months of next year. So far, with so little known about the device, other than it is in development, little can be said about its likely effect. Apple Inc. (NASDAQ:AAPL) executives will not have have nightmares about the device just yet.