Alibaba on Thursday confirmed reports of a recent partnership with Apple that will bring AI features to iPhones sold in China. This agreement is important for Apple, as iPhone sales have fallen in the world's largest smartphone market. The handset experienced an 11% decline in China, according to Apple's latest earnings report.
According to Joseph Tsai, chairperson of Alibaba, "Apple talked to several companies in China. In the end, they chose to do business with us. They want to use our AI to bring their phones to life. We are very honored to do business with a big company like Apple."
According to reports, Apple's previous deal with China's Baidu struggled with adapting its AI. Apple is also believed to have held talks with ByteDance and DeepSeek before deciding on Alibaba. Such partnerships are important for the U.S. companies like Apple as they apply for regulatory approval in China. Both Alibaba and Apple have reportedly submitted relevant materials to local authorities.
Before the company's most recent earnings call, CEO Tim Cook said the lack of Apple Intelligence, the company's in-house generative AI solution, was one cause of slowing international sales.
"In the December quarter, we saw that in the markets where we launched Apple Intelligence, the iPhone 16 family performed stronger year-over-year than in the markets where we didn't launch Apple Intelligence," the executive told CNBC.
The company is counting on Apple Intelligence to deliver the next major iPhone "super cycle" — a term that refers to a large increase in sales of the device. The company's speed and strategy in rolling out its own generative AI solution has struggled with growth, as Google continues to introduce new Gemini features through Samsung phones, Pixel devices, and other Android offerings.
Increased domestic competition has also reduced Apple's market share in China. Vivo was the leader in the fourth quarter of last year, with 17% of the market, according to figures from research firm Canalys. Huawei, which experienced a big rebound after sanctions from the first Trump administration, increased shipments by 37% year-on-year, and took second place with 16% market share. Apple, which had a 24% market share last year, dropped to 15%, putting it in third place equal with Xiaomi and Oppo.
