By Casey Hall
SHANGHAI (Reuters) -Alibaba will partner with Apple to support iPhones’ AI services offering in China, its chairman said on Thursday, a move likely to help the U.S. company ease falling smartphone sales in its key market.
For Alibaba, the partnership is a major win 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.
The landmark deal also resolves months of speculation over Apple’s AI strategy in the region as the iPhone maker had been in talks with Chinese tech leaders including Baidu, ByteDance and Tencent, Reuters and the Information have reported.
“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 World Government Summit in Dubai.
While Apple’s phones outside China utilize a combination of its proprietary Apple Intelligence and OpenAI’s ChatGPT, Tsai did not specify whether the Alibaba partnership would follow a similar model.
In China, consumer-facing AI products require regulatory approval, and The Information reported earlier that both Alibaba and Apple have already submitted materials to authorities.
The Hong Kong-listed shares of Alibaba jumped as much as 9.2% to HK$124.3, their highest since January 2022. The stock pared gains to close up 2.6%.
Apple did not immediately respond to a request for comment.
“Instead of viewing the Alibaba-Apple partnership through the lens of China’s AI strength, the partnership is mainly a recognition of Alibaba’s AI capability,” said Lian Jye Su, a chief analyst at tech research firm Omdia.
Other analysts said 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 AI features,” said Will Wong, an analyst with research firm IDC.
CRITICAL TIME
The AI integration comes at a critical time for Apple, which has faced declining iPhone sales in China amid growing competition from domestic rivals, particularly Huawei.
Industry analysts have pointed to the absence of advanced AI features – a key selling point in latest-generation smartphones – as a significant disadvantage for Apple in the Chinese market.
Apple suffered a notable setback in China in 2024, losing its crown as the country’s leading smartphone vendor. For its fiscal first quarter ended Dec. 28, Apple’s Greater China sales plunged by 11% to $18.51 billion.
According to market research firm Canalys, Apple’s annual shipments in China fell 17%, allowing domestic manufacturers to surge ahead.
Vivo captured the largest market share at 17%, while Huawei secured second place with 16%, pushing Apple to third place with 15% of the market.
Alibaba has become a Chinese AI favourite among investors early in 2025, with its stock price up more than 40% so far this year.
The firm in late January released a new version of its Qwen 2.5 artificial intelligence model whose functionality it said surpassed that of DeepSeek-V3, which caused a stir earlier this year for its capability and low cost.
(Reporting by Casey Hall and Liam Mo; Editing by Anne Marie Roantree, Shri Navaratnam and Alex Richardson)
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