With the world's largest search engine and mobile OS, Google (NASDAQ:GOOG) (NASDAQ:GOOGL), typically fears national governments more than industry rivals. However, the tech giant should be scared of one of its biggest allies -- Samsung (NASDAQOTH: SSNLF).
Google Android runs 84% of the world's smartphones and about 70% of all tablets, and Samsung remains the world's largest manufacturer of Android devices. In fact, the South Korean company accounts for nearly a fourth of all smartphones internationally and 18% of the global tablet market, according to Gartner and IDC.
What if Samsung dumped Android?
If Samsung ever declared independence from Google with its own operating system, Android's mobile market share would plunge and Samsung could become the third-largest mobile platform. Google is well aware of that threat. That's why it rotates its Nexus tablet brand among underdog Android manufacturers, has been bundling more Google services with Android , and introduced stricter design standards for Android 5.0.
Breaking free from Android makes sense for Samsung. The company's global smartphone market share plunged from 32.1% in the third quarter of 2013 to 24.4% in the same period of this year, due to rising competition from cheaper Android competitors such as Xiaomi and Lenovo. Separating from that crowded pack would also let Samsung fully control both its hardware and software, like primary rival Apple (NASDAQ:AAPL).
Let's look at how Samsung is decreasing its dependence on Google, and if these bold efforts will pay off.
Samsung unveiled its own Linux-based OS, Tizen, in January 2012. Samsung installed Tizen across most of its smartwatches over the past year, including the 3G-enabled Gear S. That was a defiant move against Google's Android Wear. To date, only one Samsung smartwatch, the Gear Live, runs Android Wear and can pair with non-Samsung phones.
By launching smartwatches exclusive to its own phones, Samsung demonstrated that it could develop its own ecosystem, akin to the way in which Apple made Apple Watch an iPhone exclusive.
Samsung initially planned to launch its first Tizen-powered smartphone, the Samsung Z, earlier this year in Russia. However, the launch was delayed indefinitely due to a lack of developer support. Samsung held app contests to attract more developers, but many still prefer launching their apps on the much larger Google Play and Apple App stores.
But there are glimmers of hope in the lower end of the market. Samsung recently announced plans to launch a sub-$100 Tizen handset in India by the end of December, presumably to compete against Google's Android One devices. If Tizen gains traction in emerging markets, the fledgling platform could attract more app developers.
Samsung's app store
Google monetizes Android through the Google Play Store, and takes a 30% cut of digital purchases. That's why Google isn't happy that certain companies -- Amazon.com (NASDAQ:AMZN), for example -- "forked" Android to replace Google Play with their own app stores.
But by forking Android and cutting ties with Google, customers lose access to key Google services like Maps and Drive. Since Samsung didn't want to disable the most useful components of Google's ecosystem, it launched its own app store, known as Galaxy Apps (formerly known as Samsung Apps), within Android instead.
The Galaxy Apps Store is still tiny compared to Google Play. However, it already boasts an impressive library of exclusive games, including Disney's Temple Run: Brave, Microsoft's Minecraft, Sega's Sonic the Hedgehog, and Gameloft's The Amazing Spider-Man 2. Like Google, Samsung takes a 30% cut of digital purchases, but it could attract more developers with a lower commission.
If Samsung's Galaxy Apps Store grows large enough, and the company convinces developers to port its Android titles to Tizen, it could solve Tizen's main problem of weak developer support.
The ultimate "frenemies"
If Samsung dumped Android for Tizen across all of its smartphones, it would inevitably lose market share. Yet it could retain enough customers to cling on to its top spot in hardware, which would convince developers to create more Samsung apps. In my opinion, that strategy would be preferable to sinking into a saturated sea of Android handsets.
For now, Samsung and Google still need each other. Samsung is the world's largest maker of Google Chromebooks -- a lucrative new source of revenue beyond smartphones -- and Google recently integrated some of Samsung KNOX's security features into Android 5.0 for enterprise customers.
That symbiotic relationship could finally end when Samsung musters the strength to break free from Google. When that happens, I believe Samsung can survive, and eventually thrive, without Android-powered devices.