Apple seeks China AI partners amid regulatory pressure

Attempts by Apple to deploy its AI technology in China have hit regulatory roadblocks, highlighting the growing challenges foreign device manufacturers face in one of the world’s largest telecommunications markets. The Cupertino-based company’s recent struggles underscore a shifting landscape where regulatory compliance increasingly demands collaboration with domestic AI providers.

The situation became especially evident three months ago when Apple’s iPhone 16 launch in China failed to generate enthusiasm among consumers seeking advanced AI capabilities. The launch’s impact was further diminished by Huawei Technologies’ well-timed release of its AI-enabled device, which showcased locally-approved artificial intelligence features that Apple has yet to implement in the region.

According to senior officials from the Cyberspace Administration of China, foreign device manufacturers have to submit LLMs used by AI features on phone hardware with local authorities for approval or face significant delays. The directive, emphasised during the recent World Internet Conference in Wuzhen, specifically pointed to using Chinese firms’ pre-approved large language models (LLMs) as a path to clearance.

Despite Apple’s CEO Tim Cook’s third visit to China this year, which included participation in a CEO summit with Chinese Premier Li Qiang, the current situation demonstrates the gravity of local regulatory challenges. The company has initiated exploratory discussions with Chinese tech giants, including Baidu, ByteDance, and AI startup Moonshot, seeking partnerships that could facilitate the deployment of its AI features in the Chinese market.

Apple’s stakes are exceptionally high, which has weakened its negotiating position in China. Despite China accounting for 17% of Apple’s total revenue last year, the company experienced an 8% decline in regional sales amid intensifying competition from Huawei and other domestic providers of hardware and accompanying AI service.

JP Morgan analyst Samik Chatterjee projects that without successful partnerships with local firms, regulatory uncertainty could delay Apple Intelligence’s introduction in China until at least the second half of 2025. The timeline threatens Apple’s competitive position in a market where domestic manufacturers rapidly advance their AI capabilities and already have authorities’ approval for their offerings.

Apple’s current AI deployment strategy outside China relies on on-device processing, private cloud compute servers, and OpenAI’s ChatGPT for advanced queries. However, this approach faces significant hurdles in China, where regulators require all companies offering generative AI services to undergo rigorous official testing of their models.

The situation reflects a broader trend in China’s telecommunications sector, where regulatory requirements increasingly favour domestic technology providers. Foreign device manufacturers must now navigate a complex landscape where technical capabilities no longer guarantee market access.

The emphasis on local partnerships and the use of domestic AI models suggests a future in which success in the Chinese market may depend as much on regulatory compliance as technological innovation.

China’s regulatory framework (and increasingly, those of the EU and Australia) poses challenges for companies like Apple, which typically maintains strict control over its ecosystem. The requirement to potentially integrate Chinese-developed LLMs represents a significant departure from the company’s usual product development and deployment strategies.

As the situation evolves, it is a crucial case study for other foreign device manufacturers looking to deploy AI-enabled products in China. The outcome of Apple’s regulatory navigation could set important precedents for others seeking access to the world’s largest telecommunications market.

See also: Vivo leads, Apple falls: The changing face of China’s smartphone industry

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