Is Google Tightening Its Grip on China? An In-Depth Analysis of Google’s Adjustments to Android’s Open Source Strategy and Its Impact on Future Mobile Dynamics

Click to follow👆Investing as a lifelong practiceRecently, Google has made significant adjustments to its Android open-source strategy, causing quite a stir. Previously, Google maintained both a public-facing AOSP branch and an internal proprietary branch, leading to version misalignment, code conflicts, and increased development and maintenance costs. Now, Google has centralized all development work internally, and in the future, the AOSP source code will only be released when new versions are launched, preventing the public from tracking code changes in real-time. Given that companies like Xiaomi, Oppo, and Vivo build their systems on Google’s open-source Android, it is not hard to see why some might think Google is tightening its grip on us. Due to the implications for investments in Xiaomi and Google, I have done extensive work to interpret Google’s actions and share insights for discussion:1. Google’s Core Objective: Building an “AI-Native + Hardware Closed Loop” Ecosystem• Strategic Essence (Progress from 2024-2025):Google has achieved two key breakthroughs through internal-led development and selective closed-sourcing: ◦ Deep Integration of AI and Systems: Android 15, set to be released in 2024, will officially integrate Gemini Nano 2 (a multimodal model running on-device), mandating that new devices in 2025 come pre-installed with it, while restricting manufacturers from replacing it with other AI services (such as Samsung’s Gauss or Xiaomi’s MiLM) through closed-source APIs. ◦ Commercialization of Hardware Closed Loop: The Pixel 8 Pro is projected to sell 18 million units in 2024 (according to Counterpoint data), leveraging exclusive AI features (like “Video Boost” cloud rendering) to increase hardware gross margins from 18% (2023) to 24% (2025 Q1 report).• Responding to Competitive Landscape: ◦ Huawei’s HarmonyOS: By March 2025, HarmonyOS is expected to have over 800 million global devices (including IoT), with a market share exceeding 12% in Europe, pressuring Google to accelerate its closed-sourcing efforts; ◦ Apple Threat: iOS 18’s “Apple Intelligence” now supports cross-device AI collaboration, necessitating Google to strengthen its control over high-end devices from Samsung and Xiaomi through Android.2. Logical Impact on Investments in Google (Conclusion for 2025)Core Benefits: AI Monetization and Hardware Synergy1. Structural Growth in Service Revenue: • AI Subscription Model: Gemini Advanced ($20/month) is expected to reach 48 million users (2025 Q1), contributing over $1.15 billion in annual revenue; • Enhanced Advertising Accuracy: User behavior predictions based on on-device AI are expected to increase Android’s advertising CPM (cost per thousand impressions) by 19% year-on-year (2024 vs. 2025).2. Reevaluation of Hardware Business Value: • The Pixel series aims for a shipment target of 25 million units in 2025, with its share in the high-end market (over $600) rising from 4.2% (2023) to 7.8% (2025 Q1), driving growth in pre-installed service revenue; • The cost of the self-developed Tensor G4 chip is expected to decrease by 30% (using TSMC’s N3E process), with hardware gross margins exceeding 25%.3. Risks and Responses (Current Status in 2025)1. Iteration of Manufacturer Cooperation Models: • Samsung’s Compromise: In 2024, Samsung signed an “AI-First Agreement” with Google, abandoning Bixby for the Galaxy S25 series, which will come pre-installed with Gemini; • Xiaomi’s Rebound: The Pengpai OS 2.0 (to be released in January 2025) significantly reduces reliance on AOSP, with the Chinese version removing Google frameworks, although the international version remains subject to GMS constraints.2. Marginal Reduction of Antitrust Risks: • The EU approved Google’s “Conditional Closed Source” proposal in November 2024, allowing closed-sourcing of core AI modules while requiring basic APIs to be open to third parties; • Google has split the Android open-source branch (AOSP-Lite) to meet compliance requirements, keeping fine pressures manageable.4. Core Changes in Investor Logic (Key Focus for 2025)1. From “Ad-Driven” to “AI + Hardware Dual Engine”• Basis for Valuation Reevaluation: ◦ Google’s expected forward PE ratio for 2025 is projected to rise from 24 times (2023) to 28 times, nearing Apple’s 30 times, reflecting market recognition of AI monetization; ◦ Key Indicator Validation Points: ▪ Whether the Gemini user payment rate exceeds 15% in 2025 (currently 9%); ▪ Whether Pixel can surpass iPhone in the high-end market in India (current shares: Apple 52% vs. Pixel 18%).2. Geopolitical and Ecological Fragmentation• Independence of the Chinese Market:Xiaomi, Honor, and other Chinese manufacturers are fully transitioning to self-developed OS (Pengpai OS, MagicOS), with the contribution rate of the AOSP China branch dropping from 35% in 2019 to 12% in 2025, as Google actively reduces investment and focuses on the European and American markets.• Competition in Emerging Markets:Google has partnered with Transsion (TECNO) to launch the “Android Go + Gemini Lite” program targeting low-end devices in Africa and Southeast Asia, with a pre-installation target of 120 million units in 2025 to counter HarmonyOS expansion.5. Conclusion: Google’s “Offensive-Defensive Balance” in 20251. Offensive Strategy: • Capturing Apple users through AI binding (Gemini) and high-end hardware (Pixel); • Charging manufacturers an “AI Tax” through closed-source modules (like Android ML Kit).2. Defensive Strategy: • Tolerating the independence of the Chinese manufacturer ecosystem while locking international devices with GMS + AI agreements; • Maintaining basic open-source compliance with AOSP-Lite to avoid EU break-up.6. Core Observational Indicators in the Short and Long Term• Short Term (within 2025): Watch for whether Google announces the “Android 16 + Gemini Ultra” end-cloud collaborative architecture at the Google I/O conference in May 2025;• Long Term (2026-2027): Assess whether Google can penetrate AI services into IoT and automotive OS (competing with Xiaomi’s SU7 and Tesla’s Model 3).Small tips: Personally, I believe the impact on Xiaomi is minimal. Since the release of the Pengpai system, it has been evident that Xiaomi is on the path to de-Androidization, gradually moving towards Huawei’s route, albeit without the need for excessive publicity. Xiaomi’s interconnectivity between people, vehicles, and homes is inherently self-developed at the Android base. At this critical juncture, Xiaomi has made a financing move, clearly indicating its determination to develop systems, especially in the area of AI for people, vehicles, and homes. As always, follow your own pace and don’t panic. I believe in Xiaomi’s future.

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