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We made an attempt to use it in Android 11 (for end-to-end encrypted, non-Play backups) but it didn't really seem to exist yet at least in AOSP. I don't know how much is implemented for the stock OS. It's possible Play services has enough privileges to make it work despite that.
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Ok, let's assume Play Services replace an app on Android11 using this mechanism, and the app hasn't blacklisted its data for backup. The app icon would still disappear from your homescreen and some app settings would probably be reverted. Much more complex than pushing an update.
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Android with Play is trending towards shipping a Google-built AOSP system image and kernel. I'm sure that's coming in the next couple of years. Mainline modules shipped via Play are already here though and include code loaded into system_server etc.
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Ok, you've convinced me that if you're worried about backdoors from US state-level attackers, you shouldn't be using Google Play services. However, there are other reasons why this is bad, for example this one:
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4: This will enable further modifications to apps, like injecting DRM libraries or possibly even security scanners, tracking or advertising.
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I wouldn't necessarily say that someone with that threat model shouldn't be using Play services but by using an OS including Play they're using an OS with highly trusted core components built and shipped by Google via the Play Store.
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As part of installing it, they need to add all the privileged permissions and whitelisting in order for it to work properly. They make an attempt to do it. It's not meant to be any less trusted. Play services is only designed to run as a privileged app with a ton of power.
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In my opinion, the ideal solution to all of this is for governments to require that Google makes Play services available as a regular app functioning without privileged permissions. Most of all the functionality could work. Backups, etc. wouldn't and it'd have more UX friction.
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I don't think it's a good situation for operating systems to be bundling a bunch of apps and services especially in a way that privileges them above other services. It's inherently anti-competitive, even if it wasn't Apple or Google doing it with their own OS.
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It's similarly anti-competitive when Facebook pays to get their apps/services bundled into the OS made by an OEM particularly if they get them to make them special integration / APIs not available to other services. Dislike it even with small apps / services.
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Neither of those things requires / involves root access when done properly. Backup services need to be built into the OS for important security reasons. However, it's entirely possible to have a generic encrypted backup service supporting any sync service via SAF, etc.
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