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China's Smartphone Giants Face Crackdown Over App Store Control

MarketDash Editorial Team
21 hours ago
Chinese regulators are finally putting smartphone makers on notice for unfair practices like blocking apps and hijacking traffic. After years of unchecked control over app distribution, companies charging up to 50% commissions are facing new rules that could reshape the mobile ecosystem.

In China's massive smartphone market, the tension between hardware makers and software developers has been quietly simmering for years. Now it's reached a full boil, and regulators have decided they've seen enough.

Here's the situation: For years, Chinese Android phone manufacturers have essentially run their own versions of Apple's walled garden. Since Google Play never officially launched in China, domestic brands like Huawei, Xiaomi, Oppo, and Vivo built their own app stores and ecosystems on top of Android. That gave them extraordinary power as gatekeepers between app developers and hundreds of millions of Chinese users.

And like any gatekeeper with leverage, they've used it aggressively.

The 50% Problem

Smartphone makers didn't stop at controlling distribution. They turned their devices into profit machines by charging developers extraordinary fees. While Apple and Google globally take a 30% cut of app sales and in-app purchases, China's Android app stores have pushed commissions as high as 50% of transaction value. Think about that for a moment: developers hand over half their revenue just to reach users on certain phones.

But the financial squeeze wasn't even the worst part. Phone manufacturers deployed technical tactics to entrench their advantage. They built systems that actively discourage users from downloading apps anywhere except their official stores. Try to install an app from a third-party website or alternative marketplace, and you'll face a gauntlet of warnings and roadblocks. Install the same app through the official store? Seamless. It's psychological warfare disguised as security features.

Developers describe this arrangement as a "hardcore alliance" of top phone makers collectively dictating the economics of China's app market. And for a long time, there wasn't much anyone could do about it.

When Giants Rebel

Eventually, even China's biggest software companies had enough. NetEase (NTES), one of the country's largest game publishers, started pulling its hit games from certain Android app stores in protest. The company publicly voiced its frustration with commission rates and restrictive policies.

Then Tencent escalated things. In June, the company yanked Dungeon & Fighter Mobile—one of its most anticipated releases—from Huawei, Oppo, and Vivo's app stores after revenue-sharing negotiations collapsed. When companies of this caliber are willing to sacrifice distribution and revenue to make a point, you know the situation has become untenable.

These weren't small symbolic gestures. These were calculated business decisions by industry titans who decided that standing up to phone makers was worth more than the immediate revenue loss.

Beijing Steps In

The conflict finally caught the attention of China's State Administration for Market Regulation (SAMR). In late November, regulators convened major smartphone companies in Shenzhen for what was essentially a compliance lecture under the Anti-Unfair Competition Law.

The meeting was notable for its directness. Rather than speaking in vague regulatory language, SAMR officials explicitly called out "irrational competition" in the mobile sector. They named specific problematic behaviors: traffic hijacking, forced redirects, and malicious incompatibility. The message was unmistakable—tactics that Chinese Android vendors considered normal business practice are now being classified as illegal anti-competitive conduct.

What makes this intervention particularly interesting is the regulatory approach. China's Android market isn't dominated by a single company; it's fragmented among several major players. Traditional antitrust enforcement often focuses on monopolies with overwhelming market share. But SAMR's guidance makes clear that exclusionary behavior can violate the law even when no single firm controls the market.

The Supreme Court reinforced this principle in March with a judicial interpretation stating that using technical means to obstruct rival software or services constitutes unfair competition, regardless of the offender's size. In other words, you don't need to be a monopoly to break competition law—you just need to abuse whatever platform power you have.

What Changes Now

For China's smartphone giants, the regulatory message is clear: adjust your behavior. Tactics they've treated as standard practice—from aggressive commissions to embedded software barriers—are now compliance risks. Companies like Huawei, Xiaomi, Oppo, and Vivo will need to rethink their app store strategies.

That doesn't mean the lucrative app store revenue models will disappear overnight. Games generating 50% commissions have been enormously profitable, and companies won't abandon those revenue streams without a fight. But they'll need to operate under stricter scrutiny going forward.

For software developers and content providers, the intervention offers hope, though it's not a magic solution. The new guidance alone won't dismantle the dominance of built-in app stores. The mobile giants still control distribution, and that fundamental leverage remains. But developers now have official policy backing their complaints, which changes the negotiating dynamic considerably.

The Bigger Picture

What's really at stake here goes beyond commission percentages. This is about who controls access to China's digital marketplace and under what terms. For years, smartphone makers leveraged their hardware control to extract maximum value from software developers. They built closed ecosystems, charged premium tolls, and used technical barriers to maintain their position.

That model is now under regulatory pressure. Beijing has signaled that unchecked platform power by hardware firms won't be tolerated anymore. The hardware-software tension won't resolve overnight—the incentives driving manufacturers to tighten their ecosystems are too powerful. But the ground rules are shifting.

Phone makers can no longer assume that controlling the hardware means they can dictate terms to everyone building on top of it. Regulators have redrawn the boundaries of acceptable behavior, and everyone in China's mobile industry is adjusting to the new reality.

The "hardcore alliance" of smartphone makers may not be broken yet, but it's definitely on notice.

Back to News

China's Smartphone Giants Face Crackdown Over App Store Control

MarketDash Editorial Team
21 hours ago
Chinese regulators are finally putting smartphone makers on notice for unfair practices like blocking apps and hijacking traffic. After years of unchecked control over app distribution, companies charging up to 50% commissions are facing new rules that could reshape the mobile ecosystem.

In China's massive smartphone market, the tension between hardware makers and software developers has been quietly simmering for years. Now it's reached a full boil, and regulators have decided they've seen enough.

Here's the situation: For years, Chinese Android phone manufacturers have essentially run their own versions of Apple's walled garden. Since Google Play never officially launched in China, domestic brands like Huawei, Xiaomi, Oppo, and Vivo built their own app stores and ecosystems on top of Android. That gave them extraordinary power as gatekeepers between app developers and hundreds of millions of Chinese users.

And like any gatekeeper with leverage, they've used it aggressively.

The 50% Problem

Smartphone makers didn't stop at controlling distribution. They turned their devices into profit machines by charging developers extraordinary fees. While Apple and Google globally take a 30% cut of app sales and in-app purchases, China's Android app stores have pushed commissions as high as 50% of transaction value. Think about that for a moment: developers hand over half their revenue just to reach users on certain phones.

But the financial squeeze wasn't even the worst part. Phone manufacturers deployed technical tactics to entrench their advantage. They built systems that actively discourage users from downloading apps anywhere except their official stores. Try to install an app from a third-party website or alternative marketplace, and you'll face a gauntlet of warnings and roadblocks. Install the same app through the official store? Seamless. It's psychological warfare disguised as security features.

Developers describe this arrangement as a "hardcore alliance" of top phone makers collectively dictating the economics of China's app market. And for a long time, there wasn't much anyone could do about it.

When Giants Rebel

Eventually, even China's biggest software companies had enough. NetEase (NTES), one of the country's largest game publishers, started pulling its hit games from certain Android app stores in protest. The company publicly voiced its frustration with commission rates and restrictive policies.

Then Tencent escalated things. In June, the company yanked Dungeon & Fighter Mobile—one of its most anticipated releases—from Huawei, Oppo, and Vivo's app stores after revenue-sharing negotiations collapsed. When companies of this caliber are willing to sacrifice distribution and revenue to make a point, you know the situation has become untenable.

These weren't small symbolic gestures. These were calculated business decisions by industry titans who decided that standing up to phone makers was worth more than the immediate revenue loss.

Beijing Steps In

The conflict finally caught the attention of China's State Administration for Market Regulation (SAMR). In late November, regulators convened major smartphone companies in Shenzhen for what was essentially a compliance lecture under the Anti-Unfair Competition Law.

The meeting was notable for its directness. Rather than speaking in vague regulatory language, SAMR officials explicitly called out "irrational competition" in the mobile sector. They named specific problematic behaviors: traffic hijacking, forced redirects, and malicious incompatibility. The message was unmistakable—tactics that Chinese Android vendors considered normal business practice are now being classified as illegal anti-competitive conduct.

What makes this intervention particularly interesting is the regulatory approach. China's Android market isn't dominated by a single company; it's fragmented among several major players. Traditional antitrust enforcement often focuses on monopolies with overwhelming market share. But SAMR's guidance makes clear that exclusionary behavior can violate the law even when no single firm controls the market.

The Supreme Court reinforced this principle in March with a judicial interpretation stating that using technical means to obstruct rival software or services constitutes unfair competition, regardless of the offender's size. In other words, you don't need to be a monopoly to break competition law—you just need to abuse whatever platform power you have.

What Changes Now

For China's smartphone giants, the regulatory message is clear: adjust your behavior. Tactics they've treated as standard practice—from aggressive commissions to embedded software barriers—are now compliance risks. Companies like Huawei, Xiaomi, Oppo, and Vivo will need to rethink their app store strategies.

That doesn't mean the lucrative app store revenue models will disappear overnight. Games generating 50% commissions have been enormously profitable, and companies won't abandon those revenue streams without a fight. But they'll need to operate under stricter scrutiny going forward.

For software developers and content providers, the intervention offers hope, though it's not a magic solution. The new guidance alone won't dismantle the dominance of built-in app stores. The mobile giants still control distribution, and that fundamental leverage remains. But developers now have official policy backing their complaints, which changes the negotiating dynamic considerably.

The Bigger Picture

What's really at stake here goes beyond commission percentages. This is about who controls access to China's digital marketplace and under what terms. For years, smartphone makers leveraged their hardware control to extract maximum value from software developers. They built closed ecosystems, charged premium tolls, and used technical barriers to maintain their position.

That model is now under regulatory pressure. Beijing has signaled that unchecked platform power by hardware firms won't be tolerated anymore. The hardware-software tension won't resolve overnight—the incentives driving manufacturers to tighten their ecosystems are too powerful. But the ground rules are shifting.

Phone makers can no longer assume that controlling the hardware means they can dictate terms to everyone building on top of it. Regulators have redrawn the boundaries of acceptable behavior, and everyone in China's mobile industry is adjusting to the new reality.

The "hardcore alliance" of smartphone makers may not be broken yet, but it's definitely on notice.

    China's Smartphone Giants Face Crackdown Over App Store Control - MarketDash News