Apple Partners with Alibaba for AI Push in China, Aiming to Reverse Market Decline

Apple is partnering with Alibaba to introduce its Apple Intelligence platform in China, aiming to recover its position in the world’s largest smartphone market. A report published Tuesday by The Information details the agreement, which follows Apple’s exploration and rejection of potential partnerships with AI startup DeepSeek and ByteDance.

The strategic Apple Alibaba AI partnership seeks to integrate advanced AI capabilities, possibly including Alibaba AI technology used by Apple, into iPhones. This move comes in response to a 17% annual sales drop and a 25% decline in the final quarter of 2024.

Apple’s initial choice, Baidu, was ultimately later scrapped due to difficulties adapting the Chinese search giant’s AI models. The models reportedly fell short of the company’s standards.

Although China is a key market, Apple Intelligence has yet to debut there. CEO Tim Cook cited the absence of the feature as a major factor in a recent 11% iPhone sales decline in China, with domestic competitors like Huawei gaining ground. Huawei overtook Apple in the Chinese market in 2024, partly due to its aggressive push into AI.

Alibaba’s Qwen model reportedly demonstrated superior performance in various tests, surpassing models from Meta Platforms (Llama) and DeepSeek (V3). Alibaba’s extensive consumer data and understanding of the Chinese market could also enable Apple to provide personalized generative AI features, potentially leveraging Big Data Analytics.

This news comes just before Apple’s anticipated fourth-generation iPhone SE launch. The budget-friendly iPhone SE has been a significant sales driver in China and India, the world’s two largest smartphone markets.

For its U.S. launch, Apple partnered with OpenAI, integrating ChatGPT into Siri. Apple remains open to further collaborations, including potential integration with Google’s Gemini, although these are only discussions.

JPMorgan analysts suggest the China AI rollout, reflecting a broader Apple and Alibaba’s AI collaboration, could be “significant progress” for Apple and potentially boost sales of the iPhone 16 or the upcoming iPhone 17. The enterprise AI market is already valued at over a trillion dollars. IDC analyst Will Wong cautions that it “won’t be an easy fight” for Apple in China.