China’s Android turf war faces a regulatory reckoning

After years of controlling the apps on their products, smartphone brands are on notice that China’s market regulator won’t tolerate unfair practices like app blocking and traffic hijacking

By Vivian Toh

In China’s huge yet semi-walled smartphone market, a long-simmering feud between handset makers and software developers is finally boiling over.

For years, domestic Android phone brands have leveraged their control of devices and app distribution to tilt the playing field in their favor. They’ve built their own app stores and services on top of Android – effectively replicating Apple’s closed ecosystem model – and positioned themselves as gatekeepers between developers and China’s hundreds of millions of users. This entrenched hardware-versus-software conflict stayed largely out of the spotlight, but now Chinese regulators are stepping in, signaling that the era of unchecked platform power may be nearing its end.

Hardware-software feud: From “hardcore alliance” to 50% app tax

As Android’s global services (like Google Play) never officially took root in China, domestic manufacturers filled the void with their own app marketplaces, pre-installed apps, and custom interfaces. This arrangement gave phone makers leverage well beyond the hardware itself. Control over operating systems – from default apps and permissions to distribution channels – became a powerful commercial tool. Accessing China’s massive Android user base often meant software firms had to accept onerous terms set by the phone makers. Over time, that leverage solidified into what developers describe as a de facto “hardcore alliance” of top phone makers jointly dictating app market economics.

One outcome was sky-high commission rates. Domestic Android app stores steadily drove up their revenue share on app sales and in-app purchases, in some cases demanding 50% of transaction value – far above the 30% cut that Apple and Google take globally. At the same time, developers accused handset makers of using technical tactics to favor their own services and hobble rivals’ apps. In essence, China’s Android giants turned the smartphone into a gatekeeper walled garden – one that they collectively profited from, at developers’ expense.

The consequences have been tangible. NetEase (NTES.US; 9899.HK), one of China’s biggest game publishers, has openly rebelled against these practices. After voicing discontent with app store commissions, NetEase began withdrawing its hit games from certain Android app stores in protest. Tencent (0700.HK) made a similar move this year: in June, it yanked the highly anticipated Dungeon & Fighter Mobile off Huawei, Oppo and Vivo’s stores after revenue-sharing talks broke down. These acts of defiance by industry giants underscore how contentious the 50% cut and restrictive policies had become.

Phone manufacturers haven’t relied only on high commissions to lock in their advantage. They’ve also engineered their systems to actively discourage users from downloading apps via any outside source. Attempts to install an app from a third-party website or alternative app store trigger a gauntlet of warnings and roadblocks. Meanwhile, installing that very same app through the official store is seamless. It’s a psychological and technical barrier explicitly designed to deter deviation.

Regulators step in: New rules of fair play

It was only a matter of time before Beijing’s regulators took notice of these unfair tactics. In late November, China’s State Administration for Market Regulation (SAMR) convened major smartphone companies in Shenzhen to issue compliance guidance under the Anti-Unfair Competition Law. The meeting – notable for its stern tone – called out specific behaviors that officials deemed problematic. Rather than speaking in generalities, SAMR officials explicitly denounced “irrational competition” in the mobile sector, highlighting traffic hijacking, forced redirects, and malicious incompatibility as practices that disrupt market order and harm consumers’ rights. In regulatory terms, Beijing is drawing a bright red line: tactics long used by Chinese Android vendors to sideline competitors are now being framed as illegal anti-competitive conduct, not acceptable industry norms.

Crucially, the regulators are focusing on conduct over market share. Unlike a traditional monopoly scenario, China’s Android ecosystem is fragmented among several big players rather than dominated by one. SAMR’s guidance makes clear that even without a single firm controlling the market, certain exclusionary behaviors can still violate the law. In March, China’s Supreme Court underscored this point by issuing a judicial interpretation that using technical means to obstruct a rival’s software or services constitutes unfair competition, regardless of the offender’s size. The message: platform power comes with responsibility, and abuse of that power won’t be excused simply because no one company has a 90% market share.

New boundaries for China’s tech giants – and what’s next

China’s mobile ecosystem may be unique, but the implications of SAMR’s move are clear: the country’s smartphone heavyweights will have to adjust. Tactics that Chinese handset makers long treated as standard business practice – from aggressive app store commissions to deeply embedded software hurdles – are now explicitly on notice. By naming and shaming these behaviors, regulators have effectively turned them into compliance risks. For the likes of Huawei, Xiaomi (1810.HK), Oppo, Vivo and others, this likely means re-evaluating their playbooks. App stores and pre-loaded services have been lucrative, especially with games yielding up to 50% commission, but those revenue models may need to be tempered under stricter scrutiny.

For software developers and content providers, the regulator’s intervention is a hopeful sign – albeit not a cure-all. The new guidance by itself won’t dismantle the dominance of the built-in app stores overnight; the mobile giants’ grip on distribution remains firm for now. However, developers finally have the weight of official policy on their side of the argument.

Ultimately, what’s at stake in this clash is not just a few percentage points of app commission, but the future structure of China’s digital marketplace. The hardware-software tug-of-war in China’s mobile sector will not resolve overnight – the incentives (and profits) that drive manufacturers to tighten their ecosystems remain powerful. Yet the ground rules are undeniably shifting. Regulators have made it clear that unchecked, system-level leverage by hardware firms is no longer tenable. For now, one thing is certain: the rules of engagement in China’s mobile industry have been redrawn, and everyone – from phone makers to app developers – is on notice.

This commentary is the view of the writer and does not necessarily reflect the views of Bamboo Works

Vivian Toh is a Singapore-based journalist who writes about technology and co-founder of Tech Tech China, a technology media startup. You can reach her at Vivian_toh@techtechchina.com.

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