Tech giant Apple has entered a strategic partnership with China’s e-commerce giant company Alibaba, to integrate Alibaba’s Artificial Intelligence (AI) technology into iPhones sold in China.
Speaking at the World Governments Summit in Dubai, Alibaba group chairman Joe Tsai confirmed the partnership, disclosing that Apple evaluated multiple Chinese tech firms before ultimately selecting Alibaba to enhance its AI capabilities for the local market.
In his words,
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“They talked to a number of companies in China. In the end, they chose to do business with us. They want to use our AI to power their phones. We feel extremely honored to do business with a great company like Apple”.
The collaboration between both companies reportedly triggered a rise in their stock prices. Alibaba’s Hong Kong-listed shares briefly surged to their highest levels, as much as 92% since 2022 before settling with a 2.5% gain.
According to Reuters, the partnership is a major win for Alibaba in China’s competitive AI market that is home to Deepseek which made headlines this year, with models developed at a fraction of the cost of Western rivals. Recall that after the release of the Deepseek AI model, Alibaba a few days after, rolled-out the latest version of its Qwen 2.5 artificial intelligence model that it claimed surpassed the highly acclaimed DeepSeek-V3.
“Qwen 2.5-Max outperforms almost across the board GPT-4o, DeepSeek-V3 and Llama-3.1-405B,” Alibaba’s cloud unit said in an announcement posted on its official WeChat account.
It is interesting to note that DeepSeek’s success has led to a scramble among its domestic competitors in China, to upgrade their own AI models.
Commenting on the Apple and Alibaba partnership deal, Lian Jye Su, a chief analyst at tech research firm Omdia said,
“Instead of viewing the Alibaba-Apple partnership through the lens of China’s Al strength, the partnership is mainly a recognition of Alibaba’s Al capability”.
Other analysts noted that the impact for Apple would depend on how fast it rolled out features in China. “It won’t be an easy fight as the local competitors have been aggressively marketing their own Al features,” said Will Wong, an analyst with research firm IDC.
Apple’s Partnership With Alibaba, a Significant Move for The iPhone Maker in China
Apple’s partnership with Alibaba is no doubt a significant move for the Cupertino giant, as it has been grappling with declining iPhone sales in China, amid fierce competition from domestic brands like Huawei.
Data from Canalys revealed that Apple’s iPhone sales in China dropped steadily throughout 2024. The 17% iPhone sales decline was the largest that Apple has recorded in any year.
“This marks Apple’s worst annual performance in China. Apple’s premium market position faces multiple challenges- Huawei’s continuous flagship releases, the proliferation of domestic foldable phones in high-price segments, and Android brands like Xiaomi and Vivo building consumer loyalty through technological innovations,” Canalys Analyst Toby Zhu said.
While the overall smartphone market in China has remained stable, Apple appears to be losing ground to local competitors who offer more feature-rich devices at competitive prices. The lack of advanced AI features has been cited as a major setback for the company in China. The big tech unveiled the iPhone 16 in September 2024 with a promise that the new model would offer a range of AI features through Apple Intelligence.
By partnering with Alibaba, Apple is strengthening its Al presence, and potentially boosting iPhone sales in China. This move positions Apple to better compete in the world’s largest smartphone market while ensuring compliance with local policies.