Apple Partners with Alibaba for AI Services in China

Apple has selected Alibaba as its AI partner in China, a strategic move aimed at addressing the iPhone maker's declining sales in one of its largest markets. Alibaba Chairman Joe Tsai announced the partnership at the World Government Summit in Dubai.

Strategic Partnership

"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 honoured to do business with a great company like Apple," Tsai said at the summit.

The landmark deal ended months of speculation about Apple's AI strategy in China, following reports from Reuters and the information that the company had been in discussions with several Chinese tech giants, including Baidu, ByteDance, and Tencent.

Regulatory and Implementation Details

While Apple's devices outside China combine its proprietary Apple Intelligence and OpenAI's ChatGPT, specific details about the implementation model for the Alibaba partnership remain undisclosed. The information reports that both companies have already submitted materials for regulatory approval, which is necessary for consumer-facing AI products in China.

Market Impact

The announcement sparked investor enthusiasm, with Alibaba's Hong Kong-listed shares surging as much as 9.2% to HK$124.3, their highest level since January 2022, before settling to close up 2.6%.

Challenging Market Conditions

The partnership came at a crucial time for Apple, which has faced a lot of major challenges in the Chinese market recently. The company's Greater China sales declined by 11% to $18.51 billion in its fiscal first quarter ended December 28, 2024. Market research firm Canalys reports that Apple's annual shipments in China fell by 17%, dropping it to third place in market share behind Vivo (17%) and Huawei (16%).

Numerous industry pundits have attributed Apple's declining market performance primarily due to the absence of advanced AI features.

Alibaba's AI Momentum

Alibaba has emerged as a leading player in China's competitive AI landscape, with its stock price rising over 40% in early 2025. The company recently released Qwen 2.5, an AI model that reportedly outperforms DeepSeek-V3, which had gained attention for its capabilities and cost-effectiveness.

IDC analyst Will Wong cautioned that success would depend on implementation speed, noting, "It won't be an easy fight as the local competitors have been aggressively marketing their own AI features."