We aim to develop efficient and robust algorithms for nonsmooth nonlinear systems arising from complementarity problems. The semismooth Newton algorithm is popular due to its reliability and efficiency. However, it struggles with issues with imbalanced nonlinearities of the problems, leading to degraded convergence rates or failure despite help from the globalization techniques like linesearch or trust region. We introduce a right nonlinearly preconditioned semismooth Newton algorithm to address this difficulty. The critical success ingredient is that before each global Newton update, a nonlinear preconditioning step implicitly removes the so-called ‘bad components’ causing trouble via nonlinear subspace correction, inspired by Gaussian elimination but adapted nonlinearly to balance system nonlinearities. Additionally, our method integrates with a domain decomposition framework, enhancing parallelism. Numerical results on two classes of problems demonstrate significantly improved convergence over standard semismooth Newton methods.