What a Google Exit from China Could Mean for Android

By Clint Boulton  |  Posted 2010-01-17

What a Google Exit from China Could Mean for Android

News Analysis: In the days that followed Google's threat to cease operations in China after it discovered some Gmail accounts had been hacked, many experts mulled what effect the search engine's exit from the country would have on its search business.

Some look at Google's current search market share and search revenues in China and say such a move would have little impact. Google's China search share is at 31 percent, and analysts say Google banks about $300 million to $600 million from search advertising in China-between 1 to 2 percent of the company's total revenues.

But it's hard to imagine how Google wouldn't be impacted by leaving China. The country has some 360 million Web users. Google butters its bread online with advertising, and that value proposition extends its Android mobile operating system effort.

Google Jan. 5 began selling the Android-based Nexus One smartphone through its new retail Webstore channel.

If Google ceased to do business in China, would its opportunities to sell Android-based phones such as the Nexus One would dry up like a desert? That depends on whom you ask.

Gartner analyst Ken Dulaney pointed out that because Android is open source, software developers and manufacturers in China are free to do what they want. "I doubt the Chinese will care if it's free code."

Indeed, if Apple were to completely exit China, the channel for its iPhone would effectively dry up because Apple is the sole force behind the successful smartphone. AT&T just services it and iPhone developers are at the mercy of Apple. Thanks to its open-source genesis, Android could survive the Google imbroglio in China.

Yet Enderle Group analyst Rob Enderle believes that if Google is out of China and China blocks access to Google services, then the platform is effectively dead there. Even so, there is a workaround. 

"However, Google could license their tools to a Chinese company or another firm who has a better relationship with China to get around this, and I expect that is what they would do. So while initially it would create some problems, there are workarounds and I would expect Google to take them."

Analysts Discuss Google Exit from China

Forrester Research analyst Charles Golvin said it's not so simple to quantify.

"I don't know what Android-based device sales are like in China, but I expect Android would be a very, very meaningful player there," Golvin said. "Android as  [an open-source] platform is attractive because it's cheap and it's free, so it's natural that phone OEMs would adopt it there."

Where it gets dicey, Golvin said, is the difference between an "Android phone" and an "Android with Google phone." To date, Android phones are being sold in the United States with the Google branding on the device, which means Gmail, Google Maps, Google Talk and Google Voice are bundled in the phone.

"Google's potential departure from the Chinese market doesn't affect-careful wording here-Android as a platform for phone makers, but for the delivery of Android handsets that carriers want to sell and enable Google Web services on, yes, absolutely you wouldn't be able to access all of those Google back-end services." Golvin said.

Golvin did agree with Enderle that Google could get a proxy to handle all of the Google Web services for Android devices in China. That wouldn't solve only Google's problems. Google currently only sells the Nexus One through its Webstore. If Google leaves China, consumers wouldn't be able to purchase the smartphone in China, where Google planned to sell the device online as it does in the United States.

Moreover, Golvin said that if Google leaves China it would kill the so-called "gray market," where consumers buy a Nexus One, take it to China and fit it with a SIM card from China Mobile. "However it behaved would be completely unpredictable," he said.

Google doesn't have answers either. Asked about the impact of a Google exit from China on Android, a Google spokesperson told eWEEK, "We will be meeting with the Chinese government over the coming weeks and hope to find a mutually agreeable resolution, so it's too early to speculate."

Many questions clearly cloud the viability of Android software and Google Web services in China, but there is also the hardware manufacturing side to consider. Chinese handset makers Huawei and ZTE support Android and the country's Lenovo introduced LePhone at CES 2010.

Smartphones form the crux of the Android movement, but Google and partners have designs for the platform beyond handsets.

Chinese-based computer makers such as Asus and Acer have Android-based netbooks in the pipeline, and there is talk that these companies are considering making machines with Google's Chrome Operating System.

Any souring of the relationship between Google and China's government extends to the business sector there, which would quash the extension of Android from smartphones to other computing form factors.  

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