Apple has officially partnered with Alibaba to integrate AI features into iPhones sold in China, marking a critical move as the tech giant grapples with declining sales in the world’s largest smartphone market. The deal follows reports of Apple’s 11% year-over-year drop in Chinese iPhone sales, according to its latest earnings report.
Why Alibaba?
During the World Government Summit in Dubai, Alibaba chairperson Joseph Tsai confirmed the collaboration, stating,
“Apple 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 work with a great company like Apple.”
Reports suggest Apple initiallyexplored partnerships with Baidu, ByteDance, and DeepSeek, buttechnical and regulatory challenges led to Alibaba being the final choice. These partnerships arecritical for U.S. tech companies seeking regulatory approval in China, and bothApple and Alibaba have already submitted necessary materials to local authorities.
Apple’s AI Struggles and Market Challenges
Apple’s own generative AI, Apple Intelligence, is expected to drive a new iPhone “super cycle”—a term used to describe a significant boost in sales. However, CEO Tim Cook recently admitted that Apple’s slow AI rollout has impacted iPhone demand outside the U.S.:
“During the December quarter, we saw that in markets where we had rolled out Apple Intelligence, the year-over-year performance on the iPhone 16 family was stronger than in those where we had not.”
While Apple faces delays,Google continues to expand its Gemini AI features, strengthening its presence throughSamsung Galaxy and Pixel devices.Competition from domestic brands has also intensified—Vivo led China’s smartphone market inQ4 2024 with17% market share, whileHuawei surged 37% year-over-year, reclaiming16% of the market. Apple, which held24% a year ago, has now dropped to 15%, tying withXiaomi and Oppo.
What’s Next?
Apple hopes the Alibaba partnership will help regain lost ground, but regulatory approval remains a major hurdle. Ongoing U.S.-China trade tensions and potential tariffs could further impact Apple’s future in the region.
Additionally, Apple has recently strengthened ties with Donald Trump during his second presidential term, with Tim Cook donating $1 million to Trump’s inaugural committee. Apple also followed Google’s lead in renaming the Gulf of Mexico to the Gulf of America on its Maps app, a move that has stirred political discussions.