Feb 11 (Reuters) – Apple (AAPL.O) has joined forces with Alibaba (9988.HK) to integrate artificial intelligence (AI) features into iPhones in China, according to a report by “The Information” on Tuesday.
The partnership marks a significant step forward in Apple’s AI strategy in China, addressing months of speculation and competitive pressure.
This move comes at a crucial time for Apple, as it faces increasing competition from Huawei, whose AI-powered smartphones have been gaining traction since last year.
The lack of AI features in recent iPhone models had contributed to a decline in Apple’s market share within China.
Market Impact: Apple and Alibaba Shares Surge
Following the news, Apple’s stock experienced a 1.5% increase in early trading, while U.S.-listed Alibaba shares rose by 2.6%. This reflects positive market sentiment regarding Apple’s AI push in China.
Change in Strategy: From Baidu to Alibaba
Initially, Apple had selected Baidu as its primary AI partner. However, Baidu’s progress in developing AI models for Apple Intelligence did not meet the company’s expectations.
As a result, Apple explored partnerships with other Chinese tech giants, including Tencent (0700.HK), ByteDance (TikTok’s parent company), Alibaba, and the AI startup Deepseek.
While Apple considered Deepseek, the report indicated that the startup lacked the necessary workforce and expertise to support a large-scale deployment. Ultimately, Alibaba emerged as the preferred choice due to its robust AI capabilities and extensive user data.
Regulatory Approval and Market Implications
Apple and Alibaba have submitted their co-developed AI features for approval by China’s cyberspace regulator. G
aining regulatory approval is a critical step, as the absence of AI-powered functionalities had affected iPhone sales in China during the holiday quarter—a period typically marked by strong revenue.
Apple remains optimistic about strong sales growth in the upcoming quarter, signaling potential demand recovery for its flagship devices.
Why Alibaba? The Data Advantage
One key reason Apple opted for Alibaba over its competitors is Alibaba’s vast repository of consumer data.
The e-commerce giant collects extensive information on shopping patterns, payment behaviors, and user preferences, making it a valuable asset in training AI models for personalized services.
Apple vs. Competitors in China’s AI Smartphone Market
| Company | AI Features Availability | Market Share Trend |
|---|---|---|
| Huawei | AI-powered smartphones since 2023 | Increasing |
| Apple | AI features rolling out in 2024 with Alibaba | Declining but expected to rebound |
| Xiaomi | Developing AI-driven devices | Stable |
| Vivo & Oppo | Exploring AI integration | Moderate growth |
Apple’s collaboration with Alibaba is a strategic move to regain its competitive edge in China, where local brands have leveraged AI to attract consumers.
Apple’s decision to team up with Alibaba marks a turning point in its AI strategy for China. The move aims to counter Huawei’s dominance and boost iPhone sales through AI-driven personalization and improved functionality.
With regulatory approval pending, this partnership could shape the future of AI adoption in Apple devices within China.
As Apple navigates this evolving market, its ability to leverage Alibaba’s data-driven insights may play a crucial role in reestablishing its position.
FAQs
1. Why did Apple switch from Baidu to Alibaba?
Apple initially partnered with Baidu but later shifted to Alibaba after Baidu’s AI development failed to meet expectations.
2. How will Alibaba’s data help Apple?
Alibaba’s extensive user data on shopping and payment habits will aid in training AI models for more personalized iPhone experiences.
3. When will these AI features be available for iPhones in China?
The AI features are currently under regulatory review, and Apple is expected to roll them out once approval is granted.