$Apple (AAPL.US)$ is reportedly engaging in discussions with $Tencent (TCEHY.US)$ and TikTok's parent company, ByteDance, to integrate their AI models into iPhones sold in China.
What Happened: The U.S. tech giant began incorporating OpenAI's ChatGPT into its devices earlier this month. However, due to regulatory constraints in China, Apple is seeking local partners to enhance AI features on its devices. The discussions with Tencent and ByteDance are reportedly in preliminary stages, sources indicated, Reuters reported on Thursday.
Apple's move comes as it faces declining market share in China, the world's largest smartphone market. The absence of AI capabilities in its latest iPhones has been a significant drawback, especially with increasing competition from domestic brands like Huawei.
Apple, Tencent and ByteDance have yet to respond to Benzinga's queries.
Why It Matters: The potential collaboration with Tencent and ByteDance is critical for Apple as it navigates the competitive Chinese market. In recent months, Apple has faced challenges in China, including a crackdown on app store fees. In August, Apple intensified efforts to compel Tencent and ByteDance to close loopholes that allowed in-app creators to bypass Apple's 30% commission.
Moreover, Apple's AI ambitions have been met with skepticism. In October, an analyst suggested that Apple's much-anticipated AI system, Apple Intelligence, might not meet high expectations. This underscores the importance of Apple's current talks with Chinese tech giants to bolster its AI capabilities.
In November, Tim Cook expressed optimism about Apple's performance in China, highlighting positive signs despite economic challenges. However, he refrained from commenting on the potential impact of economic stimulus. This context emphasizes the strategic importance of Apple's AI integration efforts in maintaining its market position in China.
Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
