Engineers at Motorola are hard at work on a sophisticated handset, to be released next year, that parent Google Inc. hopes will provide more potent competition for devices like Apple Inc.’s iPhone, said people familiar with the matter.

Seven months after being acquired by Google for $12.5 billion, Motorola is designing its marquee handset — known internally as the “X phone” — to stand apart from existing phones, though the company is running into some obstacles, these people said.

The previously undisclosed development effort is a key facet of Google’s strategy for bolstering the miniscule market position of the cellphone pioneer, based partly on bolstering quality while reducing the quantity of Motorola products.

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