On Thursday, Alibaba confirmed the recent reports about a partnership with Apple that aims to integrate AI functionalities into iPhones sold in China. This collaboration is particularly significant for Apple, which is facing a sharp decline in iPhone sales within the world’s largest smartphone market. According to Apple’s latest earnings report, the company saw an 11% decrease in sales year-over-year in China.
During the World Government Summit in Dubai, Alibaba’s chairman Joseph Tsai stated, “Apple approached several companies in China. Ultimately, they chose to collaborate with us, aiming to utilize our AI technology for their devices. We are truly honored to partner with such a prestigious company like Apple.”
Reports suggest that Apple’s previous agreement with Baidu faced significant challenges in adapting to the Chinese market. Additionally, Apple is said to have considered partnerships with ByteDance and DeepSeek before finalizing its collaboration with Alibaba. Such partnerships are critical for U.S. companies like Apple as they navigate regulatory approvals in China; both Alibaba and Apple have reportedly submitted the necessary documentation to local regulators.
Ahead of the latest earnings call, CEO Tim Cook highlighted the lack of Apple Intelligence, the company’s proprietary generative AI solution, as a factor contributing to the slowdown in international sales.
“In the December quarter, we observed that markets where Apple Intelligence had been introduced experienced better year-over-year performance in the iPhone 16 family compared to those where it had not been deployed,” Cook explained to CNBC.
Apple is counting on Apple Intelligence to spearhead the next major iPhone “super cycle,” a term used to describe a significant surge in device sales. However, the pace and strategy of rolling out its generative AI solution have hindered its growth, particularly as Google continues to launch new Gemini features across various devices, including Samsung phones and Pixel devices.
Domestic competition has intensified, further encroaching on Apple’s market share in China. Vivo led the market in the fourth quarter of the previous year with a 17% share, according to Canalys data. Meanwhile, Huawei has seen a remarkable resurgence following sanctions from the previous Trump administration, reporting a 37% increase in shipments and capturing a 16% share. In contrast, Apple’s share fell from 24% last year to 15%, placing it in a tie for third place with Xiaomi and Oppo.
Apple is pinning its hopes on the Alibaba partnership to recover some of its lost market share, but even if the agreement clears regulatory scrutiny, Apple’s future in China remains uncertain. Ongoing tariffs and trade tensions could further detrimentally affect sales in this critical market.
Moreover, Apple has been strategically cozying up to Donald Trump during his second term. Cook donated $1 million to Trump’s inaugural committee in January. Recently, Apple also mirrored Google’s approach by renaming the Gulf of Mexico to the Gulf of America in its Maps application.
TechCrunch has reached out to Apple to gather more information regarding the Alibaba collaboration.
Compiled by Techarena.au.
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