Why China Wants to Build Its Own Smartphone Software

November 20, 2015, 4:09 PM UTC
China Daily Life - Internet
BEIJING, CHINA -NOVEMBER 20: A Chinese man and woman use their smartphones on November 20, 2014 in Beijing, China. China is the largest smartphone market in the world, with some reports estimating there are more than 500 million users in the world's mosrt populated country. (Photo by Kevin Frayer/Getty Images)
Photograph by Kevin Frayer — Getty Images

Nearly every smartphone sold today uses an operating system originally designed in the United States. Together, Google Android and Apple iOS power nearly 97% of smartphones. China would like that to change.

Chinese state-owned companies are working to develop their own mobile operating system, reports the Wall Street Journal, justifying the move as an effort to escape U.S. surveillance of the kind revealed by Edward Snowden. China’s fear is that American companies might insert “back doors” into electronics sold overseas, at the behest of the N.S.A. or other government agencies. Software or hardware back doors are essentially a shortcut that makes affected devices easy to hack.

Whether American companies have actually implemented back doors is up for debate. Apple, for example, strenuously denies the accusation. But there’s a significant amount of evidence that the U.S. has at least explored the possibility.

Although Chinese brands (including Xiaomi, Huawei, and ZTE) account for an increasing number of smartphones sold worldwide, many of their essential components are still controlled by American companies, in addition to running U.S.-designed Android software. For example, many devices use a processor sold by Qualcomm (QCOMM).

ZTE and Alibaba are among the companies that have been tapped by the Chinese Ministry of Public Security to create new operating systems “developed in-house,” according to the Wall Street Journal. Spreadtrum Communications is reportedly making a chip that will run those operating systems by the end of the year. Initially, the resulting product is likely to be a bare-bones affair for government employees in sensitive positions, such as police officers, and the devices it powers could lack essential consumer features like a camera or Wi-Fi.

Distrust over imported technology goes both ways. A U.S. House of Representatives panel famously accused Huawei, a Chinese networking vendor and currently the world’s third-largest smartphone maker, of being a threat to national security and using back doors to funnel sensitive corporate intellectual property to the Chinese government. However, a U.K. report from earlier this year concluded that Huawei gear is not a threat.

This isn’t the first time China has tapped companies to build replacements for American software. It’s recently been encouraging use of a Microsoft (MSFT) Windows alternative developed in Shanghai called NeoKylin. According to Dell, 40% of the PCs it sells in China are running the operating system.

Although security is China’s public reason for encouraging development of its own mobile operating system, there’s also a clear economic motive for China to want its citizens to use domestic technology. The company was able to keep American Internet companies like Google largely out of the market for years, which gave homegrown Chinese businesses a chance to gain a foothold. Today corporations like Baidu are multi-billion-dollar businesses that compete with their American counterparts.

So while China’s effort to make a homegrown smartphone might not have a big economic impact in the short term, it could easily evolve into a rival for Google (GOOG) and Apple (AAPL) down the line.

For more on Chinese smartphone companies, watch this Fortune video:

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