Why Google's clash with Acer and Alibaba strains China's Android market

Google's intervention to stop Acer launching a smartphone with search rival Alibaba's "forked" version of Android is reportedly causing tension with Taiwanese and Chinese handset makers - and might even threaten Android's unity in China.
The search giant lobbied Acer last week to halt its scheduled press showing of a new smartphone aimed at the Chinese market, pointing out that membership of the Open Handset Alliance- the group of companies forming the device, carrier, semiconductor, software and "commercialisation" sides of the Android ecosystem - forbids Acer from making devices that offer forked, or incompatible, versions of Android.
Acer cancelled the launch abruptly, leaving Alibaba fuming publicly at Google's actions. John Spelich, Alibaba's international spokesman, told CNet that "Aliyun is different" from Android - dismissing remarks aimed at him by Andy Rubin, head of Google's mobile efforts including Android, saying to Spelich that "Aliyun uses the Android runtime, framework and tools. And your app store contains Android apps (including pirated Google apps)."
The upshot has been that Acer has withdrawn from the partnership with Alibaba, at least for now. But Digitimes, the Taiwan-based news site for the IT supply chain there and in China, saysthere is unease on the part of a number of ODMs (original device manufacturers) who would otherwise aim to benefit from making both Android-compatible and forked versions - the latter principally aimed at China.
Some of the China-based smartphone vendors which are building Android-based phone and have adopted locally developed application might shift to forked versions because "the loss from forgoing Android may be small," the site reports, quoting its supply chain sources.
With Alibaba, one of the biggest web destinations in China, seeking to build its own fork of Android - rather as Amazon has done in the US - Google might face a challenge from its own creation in the market where it needs unity.
Rubin indicated some of Google's concern, saying in a Google+ postthat "We were surprised to read Alibaba Group's chief strategy officer Zeng Ming's quote 'We want to be the Android of China' when in fact the Aliyun OS incorporates the Android runtime and was apparently derived from Android."
But Ming's meaning is clear - that Alibaba wants to dominate the Chinese smartphone OS landscape just as Android does the world's.
However for Google, it is important to keep Android unified around the OHA in China so that it can continue to serve Android handsets - whose activations are now running at over a miilion per day - with search results and, in time, garner advertising revenue. If Android splits into multiple competing varieties which do not all use Google for search, maps and other key functions, Google will have lost out.
The next paragraph of the Digitimes report carries a heavier warning to the company about the risks inherent in the market: "Among China-based smartphone vendors, only Huawei Technologies, ZTE, Lenovo, Haier, Oppo and a few others joined the Open Handset Alliance, the sources noted. As China is the largest smartphone market around the world, Google had better pay attention to [the] response from web service operators, smartphone vendors and consumers, the sources pointed out."
The challenge for Google is that China is the fastest-growing smartphone market in the world, and expected to be the world's largest - ahead of the US - this year.
Android powers a huge number of the smartphones sold there: according to figures provided to the Guardian by research company Gartner, in the second quarter of this year 80% of the smartphones sold in China ran Android - or 30.6m out of 38.2m, going by the shipment figures provided for the same quarter by another research company, Analysys International. That means that Android is far more used in China than broadly around the world, where it made up 65% of shipments in the second quarter according to Gartner.
Analysys said that China's smartphone business more than doubled year-on-year, up 127%, and increased sequentially by 22.5% - much faster than the world market, where year-on-year growth was only 43%.
Forecasts suggest that the Chinese smartphone market will total 430m in 2012, led by Samsung, with Apple in second place - but with Android handsets from Samsung, Huawei, ZTE, Lenovo, Coolpad, Motorola, Xiaomi, HTC and dozens of others making up most of the balance.
While Google is benefiting enormously in China from the dominance of Samsung, and the presence of other OHA members, a growing number of "white box" handset makers are focussed almost entirely on the Chinese market - and so will gravitate to the biggest app markets, even if they are not completely compatible with Google's Android. There are already multiple Android app markets in China, with varying degrees of legitimacy.
Alibaba's efforts with Aliyun, which exploits the open nature of Android to build its own OS version and app store - in the same way as Amazon has - point to the power that strong local brand names have.
The attraction of those app markets could as they grow drive a wedge between OHA members keeping world compatibility, and the local players with a keener focus on their home market, which will soon be the world's biggest.
In time, that could mean that the emergence of a successful China-only app market based around a fork of Android that might be so enticing - and lucrative - that it would pull one or more of the OHA members to abandon the group, or at least weaken its unity - as nearly happened with Acer.
In his Google+ post, Rubin lobbed some barbed comments at Alibaba, apparently warning it off courting Acer: "if you want to benefit from the Android ecosystem, then make the choice to be compatible. It's easy, free, and we'll even help you out. But if you don't want to be compatible, then don't expect help from OHA members that are all working to support and build a unified Android ecosystem."