HTC has reportedly signed a deal, which removes the company's reliance on third-party chip manufacturers. The phone manufacturer has signed a "memorandum of cooperation" with ST-Ericsson - a joint venture between STMicroelectronics and Ericsson - to develop its own mobile chips. What happens to Qualcomm?

The chips that HTC will be developing aren't for high-end smartphones. They will run on low-end devices, which will begin shipping in 2013.

Increased competition from rivals such as Samsung and Apple, and a wide portfolio of devices, caused HTC to streamline its devices through the One range: a trio of devices aimed at the high-, mid- and low-end consumers. The devices also launched with Sense 4.0, HTC's custom skin. While Samsung makes its own chips for its high-end devices, the low-end market is relatively untouched and could give HTC an advantage if it uses its own chips. Nokia has tried to tap into the market, but has faced increased competition from Chinese manufacturers.

Some have questioned the rationale behind using its own chips in low-end devices, as HTC could use established chips for a low price. Gigaom seems to think that using first-party chips is evidence of the company not quite figuring out "how to differentiate its phones from others in the Android market."

Meanwhile, HTC isn't the first company to drop Qualcomm due to issues with the company, as Samsung is rumored to be dropping the company and instead will offer Exynos quad-core processors that could debut in the Samsung Galaxy S3 in May.

In the high-end One X smartphone, HTC utilises Nvidia's quad-core Tegra 3 processor in Europe, while using the Qualcomm Snapdragon S4 processor for 4G devices in North America and other regions. Apple uses its custom A5 chip; the latest version - the A5X - featured in the iPhone 4S.

Nokia has already struck a deal with ST-Ericsson, announcing the deal back in November 2011 for all of its devices.

HTC's move comes after a $300 million stake in Beats Audio, which is being integrated into all of its products.

When contacted, HTC said it doesn't comment on rumor or speculation.

(reported by Jonathan Charles, edited by Dave Clark)