Apple Pursues AI Breakthrough in China with Siri-ChatGPT Integration Amid Regulatory Hurdles.
Apple Inc. (AAPL) is banking on its upcoming AI features to reinvigorate iPhone sales, especially in China, where demand has faltered. Yet, a significant obstacle looms: ChatGPT — soon to be integrated into Siri — faces a ban in China.
In a presentation earlier this month, Apple showcased its proprietary Apple Intelligence technology, unveiling compelling new AI functionalities. A pivotal announcement was its partnership with OpenAI to leverage the viral ChatGPT tool in a limited capacity. Specifically, when Siri requires enhanced assistance, ChatGPT can intervene. This strategic move highlights Apple's urgency to adopt the latest AI technology, striving to match tech rivals like Microsoft, Google, Meta, and Samsung, who have already made significant strides in AI. A collaboration with OpenAI could help Apple narrow this gap.
However, China has emerged as one of the first nations to regulate the generative AI technology underpinning these popular services. In August, the Cyberspace Administration of China, the nation's leading internet watchdog, introduced new industry guidelines, mandating companies to obtain approval before deployment. As of March, the organization had approved over 100 AI models exclusively from Chinese firms.
According to a recent Wall Street Journal report, Apple is actively pursuing a partnership with a Chinese AI company in preparation for the anticipated September launch of its new iPhone. However, they still need to finalize an agreement.
According to market research firm IDC, the need to find a local partner intensifies as Apple's smartphone sales experience a notable 10% drop in the year's first quarter. This decline is mainly due to a significant fall in iPhone sales in China. Rising nationalism, economic difficulties, and increased competition have caused the company to lose momentum in its second-largest market.
Resurgent Competitors.
Counterpoint Research reports a 70% surge in Huawei's sales in the first quarter, further heightening concerns about iPhone sales in China due to the impressive growth of the Chinese smartphone brand Huawei.
Should Apple fail to resolve this issue by the fall, Chinese consumers might feel disadvantaged and opt to delay their purchases until they can experience the full AI capabilities promised by Apple. "Apple is very likely to seek a local partner in China in place of OpenAI because, simply put, it needs to," commented Nabila Popal, a senior director at IDC Research. "Chinese consumers expect their premium phones to feature the latest AI functionality and may hesitate to spend over $1,000 on devices lacking all the AI bells and whistles."
A significant growth for Apple in China will be realized in the long term as Apple Intelligence evolves, offering broader use cases, extended language support beyond English, and enabling Siri to utilize local AI models for ChatGPT-like functions.
In the interim, Chinese AI companies may have an edge in catering to local consumers, particularly by offering support for more regional dialects than what foreign AI models currently provide.
Apple would be one of many foreign enterprises collaborating with the Cyberspace Administration of China for AI and smartphone integration. Earlier this year, Samsung partnered with Chinese tech giant Baidu (BIDU) to leverage its AI model for translation services. Additionally, Samsung collaborates with AI firm Meitu for photo editing tools. In other regions, Samsung employs its proprietary AI technology and Google's (GOOGL) AI model Gemini, also banned in China. Despite these efforts, according to Counterpoint Research, Samsung holds less than 1% of the total market in China.
Despite the pressing timeline, Jeff Fieldhack, a research director at Counterpoint, remains optimistic about Apple's prospects of securing a partnership in time for its fall software launch. "Apple should be able to establish a partnership swiftly due to its robust global install base, making it a lovely ally for these companies," he stated, emphasizing the potential for these firms to gain significant recognition as AI leaders within the country.
As the clock ticks, Apple’s strategy in navigating China’s tightly regulated AI landscape will be pivotal in shaping its competitive edge and market position in the world’s second-largest economy.
Source: https://community.openai.com/t/news-article-china-blocks-chatgpt-due-to-political-propganda/72941.
https://www.wsj.com/tech/ai/for-apples-ai-push-china-is-a-missing-piece-7d2b0ec6
https://www.counterpointresearch.com/insights/china-smartphone-q1-2024/.
