diff --git a/services/core/java/com/android/server/pm/ApexManager.java b/services/core/java/com/android/server/pm/ApexManager.java
index 594d78da253fe..44a21b74f4493 100644
--- a/services/core/java/com/android/server/pm/ApexManager.java
+++ b/services/core/java/com/android/server/pm/ApexManager.java
@@ -214,7 +214,7 @@ public abstract class ApexManager {
      * @return {@code true} if this package is pre-installed, {@code false} otherwise.
      */
     public static boolean isFactory(@NonNull PackageInfo packageInfo) {
-        return (packageInfo.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM) != 0;
+        return (packageInfo.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP) == 0;
     }
 
     /**
diff --git a/services/core/java/com/android/server/pm/pkg/parsing/PackageInfoWithoutStateUtils.java b/services/core/java/com/android/server/pm/pkg/parsing/PackageInfoWithoutStateUtils.java
index 91d201096fcd7..03f3b3859821a 100644
--- a/services/core/java/com/android/server/pm/pkg/parsing/PackageInfoWithoutStateUtils.java
+++ b/services/core/java/com/android/server/pm/pkg/parsing/PackageInfoWithoutStateUtils.java
@@ -321,11 +321,10 @@ public class PackageInfoWithoutStateUtils {
 
             pi.applicationInfo.sourceDir = apexFile.getPath();
             pi.applicationInfo.publicSourceDir = apexFile.getPath();
+            pi.applicationInfo.flags |= ApplicationInfo.FLAG_SYSTEM;
             if (apexInfo.isFactory) {
-                pi.applicationInfo.flags |= ApplicationInfo.FLAG_SYSTEM;
                 pi.applicationInfo.flags &= ~ApplicationInfo.FLAG_UPDATED_SYSTEM_APP;
             } else {
-                pi.applicationInfo.flags &= ~ApplicationInfo.FLAG_SYSTEM;
                 pi.applicationInfo.flags |= ApplicationInfo.FLAG_UPDATED_SYSTEM_APP;
             }
             if (apexInfo.isActive) {
diff --git a/services/tests/servicestests/src/com/android/server/pm/ApexManagerTest.java b/services/tests/servicestests/src/com/android/server/pm/ApexManagerTest.java
index c7a903be3bd20..ef51c976f003f 100644
--- a/services/tests/servicestests/src/com/android/server/pm/ApexManagerTest.java
+++ b/services/tests/servicestests/src/com/android/server/pm/ApexManagerTest.java
@@ -386,7 +386,8 @@ public class ApexManagerTest {
                 ApexManager.MATCH_ACTIVE_PACKAGE);
         assertThat(newInfo.applicationInfo.sourceDir).isEqualTo(finalApex.getAbsolutePath());
         assertThat(newInfo.applicationInfo.longVersionCode).isEqualTo(2);
-        assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM).isEqualTo(0);
+        assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP)
+                .isEqualTo(ApplicationInfo.FLAG_UPDATED_SYSTEM_APP);
         assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_INSTALLED)
             .isEqualTo(ApplicationInfo.FLAG_INSTALLED);
 
@@ -424,7 +425,8 @@ public class ApexManagerTest {
                 ApexManager.MATCH_ACTIVE_PACKAGE);
         assertThat(newInfo.applicationInfo.sourceDir).isEqualTo(finalApex.getAbsolutePath());
         assertThat(newInfo.applicationInfo.longVersionCode).isEqualTo(2);
-        assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM).isEqualTo(0);
+        assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP)
+                .isEqualTo(ApplicationInfo.FLAG_UPDATED_SYSTEM_APP);
         assertThat(newInfo.applicationInfo.flags & ApplicationInfo.FLAG_INSTALLED)
             .isEqualTo(ApplicationInfo.FLAG_INSTALLED);
 
diff --git a/services/tests/servicestests/src/com/android/server/pm/parsing/PackageParserLegacyCoreTest.java b/services/tests/servicestests/src/com/android/server/pm/parsing/PackageParserLegacyCoreTest.java
index 004d7bc2707c3..b36d9fa20d925 100644
--- a/services/tests/servicestests/src/com/android/server/pm/parsing/PackageParserLegacyCoreTest.java
+++ b/services/tests/servicestests/src/com/android/server/pm/parsing/PackageParserLegacyCoreTest.java
@@ -566,7 +566,7 @@ public class PackageParserLegacyCoreTest {
         assertNotNull(pi.signingInfo);
         assertTrue(pi.signingInfo.getApkContentsSigners().length > 0);
         assertTrue(pi.isApex);
-        assertTrue((pi.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM) == 0);
+        assertTrue((pi.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP) != 0);
         assertTrue((pi.applicationInfo.flags & ApplicationInfo.FLAG_INSTALLED) != 0);
     }
 
diff --git a/tests/StagedInstallTest/app/src/com/android/tests/stagedinstallinternal/StagedInstallInternalTest.java b/tests/StagedInstallTest/app/src/com/android/tests/stagedinstallinternal/StagedInstallInternalTest.java
index 41d6138ea894c..28c8793b363e0 100644
--- a/tests/StagedInstallTest/app/src/com/android/tests/stagedinstallinternal/StagedInstallInternalTest.java
+++ b/tests/StagedInstallTest/app/src/com/android/tests/stagedinstallinternal/StagedInstallInternalTest.java
@@ -460,7 +460,8 @@ public class StagedInstallInternalTest {
         {
             PackageInfo apex = pm.getPackageInfo("test.apex.rebootless", PackageManager.MATCH_APEX);
             assertThat(apex.getLongVersionCode()).isEqualTo(1);
-            assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM).isEqualTo(0);
+            assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP)
+                    .isEqualTo(ApplicationInfo.FLAG_UPDATED_SYSTEM_APP);
             assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_INSTALLED)
                     .isEqualTo(ApplicationInfo.FLAG_INSTALLED);
             assertThat(apex.applicationInfo.sourceDir).startsWith("/data/apex/active");
@@ -482,7 +483,8 @@ public class StagedInstallInternalTest {
         {
             PackageInfo apex = pm.getPackageInfo("test.apex.rebootless", PackageManager.MATCH_APEX);
             assertThat(apex.getLongVersionCode()).isEqualTo(2);
-            assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_SYSTEM).isEqualTo(0);
+            assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_UPDATED_SYSTEM_APP)
+                    .isEqualTo(ApplicationInfo.FLAG_UPDATED_SYSTEM_APP);
             assertThat(apex.applicationInfo.flags & ApplicationInfo.FLAG_INSTALLED)
                     .isEqualTo(ApplicationInfo.FLAG_INSTALLED);
             assertThat(apex.applicationInfo.sourceDir).startsWith("/data/apex/active");