I've tried to run android emulator on an Apple M1 chip
MacBook but it doesn't work and AVD Manager shows an error with the message: Could not start AVD. It seems the root of this problem is that M1 chip doesn't support virtualization and AVD needs VT-x for x86 images. Most of the images are based on x86 and arm based images aren't provided for latest android versions. Is there any solution to bypass this issue? (Except using physical devices and old images)

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4 Answers
UPDATE: Here is the link to the Android Emulator Apple Silicon Preview:
https://androidstudio.googleblog.com/2020/12/android-emulator-apple-silicon-preview.html
They are working on it, but it will take time. I found some preview on Twitter - Preview of Android simulator on M1 And some solutions will be available at the end of the year. Maby.
And good source for the following is here on Reddit: ARM-based Macs for Android Development?

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I doubt there is a workaround as the AVD uses Intel based API's to run the emulator, and because Apple broke up with Intel it won't work. You might just have to use a physical device or wait for a update.
That being said, there is work being done to support ARM based hosts.

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Good news !
Edit on 28th July 2021
Apple Silicon Support
There is an arm64 release version available for Android Studio Arctic Fox (2020.3.1) You can download it here https://developer.android.com/studio/archive
NDK builds doesn't work Unknown host CPU architecture: arm64
Solved https://stackoverflow.com/a/69540773/1079990
End of beta ! Thank you

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