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Chinese device makers face Google licence fee damage

Chinese device makers face Google licence fee damage

Asian device manufacturers are set to take a hit after Google announced that it would begin charging such vendors a licensing fee for apps that were previously bundled for free as part of its Android platform.

Google’s new stance is aimed at avoiding further action from EU regulators after it received a €4.3 billion fine from the European Commission in July. The EC deemed Google to be exploiting the dominance of its Android platform to proliferate its own apps, and ordered it to change this practice by 28th October or receive further fines.

From 29th October, Google will charge individual licence fees for its Chrome and Search apps, while vendors will be able to license several of its other apps – including Gmail, Maps and YouTube – as part of a bundled suite.

While the fees will only need to be paid for devices featuring the preinstalled apps due to be sold in the EU, this will nonetheless increase costs for a number of Asian vendors that make Android devices, including Samsung, Huawei, Oppo and Xiaomi.

Since the latter two companies in particular have established themselves in Europe as low-cost device manufacturers, they are more reliant on Google’s apps being bundled into the Android OS free of charge and could be damaged by the licensing fees. More high-end manufacturers such as Samsung are likely to be able to absorb the cost by increasing the price of their devices.

Xiaomi began selling devices in Spain in 2017 and has since launched in France and Italy, while Oppo sells in these markets along with the Netherlands and Russia. It is reportedly looking to begin selling in the UK.

If handset makers declined to install Google’s Search and Chrome apps on their Android devices after the apps have been separated from Google Play, the search engine firm would need to charge them $48.50 and $58.20 per device just to break even, according to Richard Windsor, the founder of Radio Free Mobile.

“However, even at $25 per unit, this will destroy the already anaemic profitability of Android handset makers, the vast majority of whom make less than $10 operating profit on every handset they make,” noted Windsor. “Given the choice, Android handset makers will continue installing both Google Search and Google Chrome on their Android devices as the alternative would seem to be economic suicide”.

He concluded: “I think that there is nothing to prevent Google’s continued dominance of Android as the EU remedies make life for Android handset makers even more impossible than it already is.”

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