No. Google AI Studio is not killing cheap Android app development. It is redefining what "cheap" actually means and exposing the vast gap between generating code and shipping a viable product.
The tool democratizes the prototype. A founder can now test an idea in hours instead of weeks, and that is genuinely valuable for validation. However, AI Studio generates an app, not a business. It does not handle the eight critical layers you listed: retention mechanics, scalable backend architecture, crash monitoring, app store compliance, privacy regulations, payment orchestration, performance optimization, and real user workflows.
This creates a dangerous illusion of completion. Founders see a working screen and underestimate the engineering, product thinking, and operational discipline required to keep users engaged and data secure. The prototype is where the excitement begins. Production is where the real cost lives.
The market will bifurcate. Template based, low complexity apps will become commoditized and their development cost will race toward zero. But production grade mobile development, the kind that handles edge cases, respects user trust, and scales without breaking, will become more valuable precisely because it is the only remaining differentiator.
I would trust an AI generated app strictly for prototypes, internal tools, or proof of concept demos. For anything customer facing, handling payments, or touching sensitive data, I would want a team that understands what the AI cannot see.