|12 February, 2020

Chinese phone brands credibly challenge Google

Manufacturers in the People’s Republic rely on Android to run their devices but they use domestic app stores inside China, where Google services are blocked.

Huawei smartphones are seen in front of displayed Google Play logo in this illustration picture taken May 20, 2019.

Huawei smartphones are seen in front of displayed Google Play logo in this illustration picture taken May 20, 2019.

Reuters/Dado Ruvic/Illustration

HONG KONG - China’s top handset makers are answering Washington’s unintended call, and that could hurt Google. Huawei, Oppo, Xiaomi and Vivo have joined together to build a shared platform to rival the Play store, Reuters reported earlier this month. It could threaten some 5% of the topline at the $1 trillion parent Alphabet, and the de-facto U.S. dominance of Android.

Manufacturers in the People’s Republic rely on Android to run their devices but they use domestic app stores inside China, where Google services are blocked. For overseas models, Chinese manufacturers have continued to rely on pre-installing Play, allowing them to offer users the most popular social apps like Facebook and WhatsApp that are not available for download in China. But President Donald Trump’s clumsy embargo in May on Huawei highlighted that Washington can restrict access to Play.

The four Chinese handset makers, which together shipped around 40% of the world’s smartphones in the fourth quarter of 2019 according to IDC, will now let foreign app developers like Facebook upload and update software to all the respective stores, through the new platform, with a single click, as it were.

That’s an attractive proposition for developers, especially those interested in rapidly expanding emerging markets - precisely where the so-called Global Developer Service Alliance will kick off: in India, where Xiaomi has over a quarter of the market, Indonesia and Russia. This method is also easier than convincing Facebook and the rest to write new code for homegrown Android alternatives like Huawei’s Harmony operating system.

Google does not break out revenue from the Play store, but an analyst at Sensor Tower estimated it generated around $8.8 billion in commissions for its parent Alphabet in 2019, over 5% of the total. Play also helps Google push through its other apps like Chrome, Gmail and Maps that contribute more to the bottom line.

If the Chinese consortium decides to compete on price – similar to the way China’s state-owned UnionPay competes with Visa and Mastercard overseas – Chief Executive Sundar Pichai could end up in a long fight for share with an alternative app universe. And the U.S. government will have lost another technology lever it can use to contain Chinese companies.

CONTEXT NEWS

- China's Xiaomi, Huawei Technologies, Oppo and Vivo are joining forces to create a platform for developers outside China to upload apps onto all of their app stores simultaneously, Reuters reported on Feb. 7 citing sources.

- The so-called Global Developer Service Alliance was originally planned to launch in March, although this may be delayed by the recent coronavirus outbreak. It will trial in nine regions including India, Indonesia and Russia.

(Editing by Una Galani and Katrina Hamlin)

© Reuters News 2020

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